Alembic Pharma Management Q&A
We have an US CEO who has been with us for last 5 years and assembled together a top Team in International Generics business. Success has come because of Product Identification ability. Year-wise market-wise plans are drawn up till 2024
We have built a strong IP Culture/Team over last 5 years or so.
We have been following Alembic Pharma for last few quarters. We mentioned about the company in our Diwali post.
Alembic Pharma is among the oldest companies in the Indian pharma industry. But no major developments took place over the last decade as the company was more into the domestic markets, and limited to the anti-infectives, cough and cold segment which are highly competitive and matured. Over last 2-3 years there has been a contrasting change in the company. The revenues are growing (earlier the growth was 10% now it is 20-25%), the margins are expanding (earlier margins were 13-15% now it is 18-20%) and the balance sheet is getting stronger and efficient.
Reason for the change is the shift towards the international generics. This segment is expanding quite quickly for the company – from about 100 odd Cr in 2010 to 235 Cr in 2013 to 450 Cr in 2014 (expected). This segment has a potential to scale up to 1000 Cr turnover over the next 2-3 years given a strong product pipeline prepared by the company. Alembic Pharma has filed 60 ANDAs (just 18 five years back and 31 are approved till date). On the domestic side, the company has been entering the specialty segments such as Ophthalmology, Cardio, Anti-Diabetic etc, which have a higher growth and a better margin. Continue reading Alembic Pharma Q&A and other updates
“management’s indifference and shareholder negligence both worked on Warren’s behalf, for the fewer folks came to the show, the more valuable would be whatever knowledge he could wrest from the company.” – from The Snowball where WB talks on the importance of attending AGMs
There is a lot of fear in the markets and several stocks in the mid and small cap space are having a free fall. These are the great times to focus and research more on the companies to find undervalued gems.
Last month, we toured South India to attend a few AGMs. We visited Avanti Feeds, Shilpa Medicare and Swelect Energy. The meetings were good and the companies seem well placed. It is often concerning to watch a few shareholders holding nominal quantities and coming over for free gifts and snacks. Despite good arrangements and the good work by the management, these shareholders often sabotage the proceedings. We need to fix this, otherwise the promoters will never treat the minorities properly. Probably having a video conferencing of AGMs may help.
Brief updates from above meetings:
Avanti Feeds: We have discussed the company many times in past and the stock has performed well too. The industry continues to see high growth rates of 30%+ since the adoption of the new shrimp specie – Vannamei. The company is superbly placed in its sector (due to the support of TUF) and ranks among the top. The management seemed quite honest, hard working and conservative. They were one of the first to understand the potential of the Vannamei specie in India and took various steps to get it introduced. The company has grown from a turnover of just 100 Cr in 2009 to 650 Cr in 2013. Avanti seems well placed as the industry is expected to remain on a good growth path for the next few years. Continue reading Updates from quarterly results and AGMs
Wish you a very Happy and Prosperous Diwali friends.
Tomorrow is the Muhurat Trading session from 3:45PM to 5PM and we would recommend all our readers to take part on this auspicious day.
Our muhurat picks are (in no particular order):
- Atul Auto
- Balkrishna Industries
We are also studying Maithan Alloys and Aarti Drugs, and one may make an entry into them.
Further, the quarterly numbers have been good so far. A brief update about the latest numbers:
Continue reading Happy Diwali: Muhurat Picks and Quarterly result updates
Last few days have been one of the most interesting and learning days for me. I travelled with a group of fellow investors and friends to Gujarat on company visit of few of the companies of our interest. We had some fantastic discussions day and night, and were able to do some very exciting ground work on the companies we visited. Here is a quick summary:
GRP Ltd. (formerly Gujarat Reclaim & Rubber Products Ltd): Company held its AGM at Ankleshwar, Gujarat. The plant was quite green and well kept. As we entered, we were provided a safety manual. Management explained that GRP has been taking social economic initiatives and has been recently certified by Japan for a fire safety practice. They are the second company in Gujarat to get this certification. We also met another investor form Mumbai who too had been tracking the company over the years and provided valuable insights.
GRP is the pioneer and third largest company in the world in the rubber reclaiming business. The company supplies to 6 out of top 10 tyres companies in the world and to 4 out of top 10 non-tyre rubber companies in the world. The company is a preferred supplier.
Continue reading Notes from company visits and AGMs
During the past few weeks, we have been on the move to attend the Annual General Meetings (AGMs) and meet the companies we have been tracking. A lot of effort has been in re-understanding the companies and preparing proper questionnaires to get a bigger and longer term picture. We are in process of preparing detailed notes and will share them in coming weeks. Here are some quick updates:
1. Mayur Uniquoters: It was one of the most pleasant and well organized AGM. The company welcomed the shareholders with open arms and proved to be a great host. The management seems to be hands on the business and way ahead of the competition. The company has a fantastic track record (50% CAGR growth in net profits over last 5 years) and has one of the best financial ratios (ROCE of 55-60% with a good dividend pay-outs).
Mayur aims to be a 550 Cr. turnover company by 2015 (company did a 315 Cr. turnover in 2012). They have undertaken a backward integration project and the same is being carried out at their new plant. The company aims to bring down the rejection rate to be able to enter the highly lucrative US Auto OEM market. The company has been building relationships with some of the best names in the industry – Ford, Chrysler, BMW, Mercedes, GM etc. The orders from BMW & Mercedes have been slow and they expect the same to pick up in 1-2 years. The backward integration project should get completed by Sept-Oct, 12.
Continue reading Updates from the company visits & AGMs
FY 2012 results are now out and the focus will shift towards earnings for FY13. Despite a very challenging market and weak economic conditions, we are happy with the financial results of the companies we track. Most of them have been able to report healthy growth and maintain their leaderships. Many of the companies have raised dividends and are now trading at very low PE (price to earning) and Price to Book (P/B) ratios. Although the macro environment and prospects remain uncertain, there is an opportunity for stock pickers to do their home work and build a quality portfolio.
Some of the noticeable results of the companies we track are: Continue reading Updates for Financial Results 2012
Q3 results have been generally good and most of our stock ideas have posted good performance. Here is a brief evaluation of their performance:
1. Balkrishna Ind: The company has yet again posted an excellent set of numbers and has surpassed the expectations. It is fantastic for a company with as large a turnover of about 2500 Crores to grow at 30%+ per annum. The company is in process of a greenfield expansion which should double their capacity in 2 years and hence the company has potential to keep growing at 30% p.a. for next 2-3 years. They are targeting 10% market share worldwide by 2014.
The stock has been a major outperformer in this market. Yet the stock is trading at just less than 10 times earnings. I do expect it to get further re-rated upwards with bigger investors coming in.
*All Financial figures are in crore rupees (except EPS).
2. Astral Polytechnik: This is another GEM of a company. The company has delivered a growth of 60%+, much more than the expectations. This quarter results were expected to be bad because of the abnormal forex movement over last few months (company imports majority of raw materials and the Indian rupee has fallen from about Rs.44 levels to Rs.54 against the dollar in a span of few months). But the rupee has now recovered to Rs.49 levels and as the company has also done some price hikes in last few months, we may see some fantastic numbers in upcoming results.
*All Financial figures are in crore rupees (except EPS).
Continue reading Quarterly Results Update (Q3 FY12)
We have discussed about Atul Auto a couple of times and to go in-depth and get a much better understanding of the company, we interacted with Mr. J V Adhia, Vice President, Finance – Atul Auto.
The company seems to be in a sweet spot with a very comfortable balance sheet and a good opportunity to maintain growth rate of about 25-30% for at least next couple of years. The co has been a leader in its existing territory – Gujarat (approx. 45% market share) & Rajasthan (approx. 30% market share), the company is now trying to go Pan India by entering new territories.
Here are the highlights from the management interview:
During the period 2001-06 the company had been growing at about 70% p.a. Till then we were a front-engine 3-wheeler company. In 2007 we decided to go pan India and introduced the more predominant rear-engine 3-wheeler segment. Some things went wrong and the company faced a rough patch, and that is the reason you notice stagnant sales for the period 2007-10. However in June 2009 period we introduced Atul Gem the rear-engine vehicle and it has been received very well in the market. The growth is back on track.
Overall about 91% of the total autos are rear-engine vehicles.
We are No #1 in Gujarat with about 44% market share & No #2 in Rajasthan with about 30% market share. Kerala & Assam are our next big markets.
We are gradually entering new territories and ramping up dealer network.
Current dealer network is about 120 dealers. A year back we had 100 dealers but only 30-40% were active! Now more than 80% are active. Plan to have 140-150 dealers by this year end and 250 in 2 years.
As of now the company is seeing a very strong demand and there is a waiting period of about 10 days. As per policy the company is taking orders on advance basis only. Hence the high advances on Balance Sheet
We are in process of doubling our capacity from 24,000 to 48,000 vehicles p.a. This expansion is being done at our existing plant and we have sufficient space.
We are expanding capacities by ongoing de-bottlenecking exercises. We are already at 20-25% higher production and the rest of the de-bottlenecking increases should happen over next 3-6 months. We have options of introducing a double shift, as and when deemed necessary.
We do envision to be 1000 Cr company by 2015-16. (Co did 203 Cr turnover in 2011 and 275 Cr is expected for FY 12)
Please check out the complete management interview (requires free login)
We mentioned Atul Auto Ltd. as one of our Muhurat picks, the conviction has grown with more research and feedback on the company. Atul Auto Ltd. looks very promising company with a strong and stable balance sheet.
Atul Auto is one of the leading 3 wheeler manufacturer and is based in Gujarat. They already have a lead in the state of Gujarat & Rajasthan and are now trying to replicate their success across new territories in India & abroad. The company is trying to enter new states and is appointing new dealers. Company has even entered into agreements to enter Bangladesh & Sri Lanka.
Atul Auto has grown @ 40-50% over the last 2 years and seems geared up to maintain good sales momentum going ahead. Here is a snapshot of financials of last 4 years:
||6M FY 12
||FY 12 Estimate
*All Financial figures are in crore rupees (except EPS). Continue reading Atul Auto Ltd.
Wish you and your family a very very Happy & Prosperous Deepawali!!! May Laxmi Ji shower her blessings and Ganesh Ji his happiness on all of us.
On this auspicious day, do participate in Samvat 2068 – Muhurat Trading session from 4:30 – 6 pm. Our Muhurat picks are:
- Nesco (560)
- Avanti Feeds (115) / IFB Agro (145)
- Balkrishna Ind (171)
- GIPCL (82)
- Indag Rubber (135)
- Gujarat Reclaim (1250)
- Atul Auto (107)
Look forward to your views. Have a happy and safe festive time!