Recommendation from Pharmaceuticals Sector

Recommendation from Pharmaceuticals Sector

This section gives a recommendation of a stock having stock price below Rs 100 with sound fundamentals and expected to give handsome returns over a one-year time horizon.

MOREPEN LABORATORIES LIMITED : HEALTH IS WEALTH 

HERE IS WHY
☛Good growth prospects.
☛Strong financial performance.
☛Improving return ratios
.

Morepen Laboratories Limited is in the business of manufacturing, producing, developing and marketing a wide range of active pharmaceutical ingredients (APIs), branded and generic formulations and also home health products. The company has its manufacturing locations situated in the state of Himachal Pradesh with trading and other incidental and related activities extending to both domestic and global markets. The company has a strong foothold in the fields of antihypertensive, anti-histaminic, antiasthmatic, anti-hypercholesterolemia and anti-diabetic drugs. It is a world leader in Loratadine produced in its Masulkhana and Baddi facilities.

The company has a leadership position as one of the largest suppliers of Montelukast Sodium, an anti-asthmatic drug. In FY20, API contributed the majority of revenue followed by diagnostics, formulation and the OTC segment. The API business has grown at 15 per cent on year-on-year basis despite loss of sales on account of lockdown towards the end of March 2020. During the year, its API domestic business has shot up by 28 per cent. Overall, APIs molecules have grown by 14 per cent. Intermediates and new molecules have shown good growth of 24 per cent and 23 per cent, respectively, in the year FY20.

All the production facilities of the company have resumed production to the extent of 80-90 per cent. In the API and diagnostics business segments, the operations of the company were marginally affected in March following complete lockdown but bounced back in the months of April and May. The company’s OTC segment launched pandemic-related protection products such as hand sanitizers, hand wash, hand rub, face masks, gloves, Vitamin C candy, Burnol antiseptic solution and antiseptic spray. The company's initiative to launch a new product range in its fight against the virus such as infrared thermometers, hand sanitizers, hand wash, face mask, anti-bacterial spray, etc. helped it to cover some ground on lost revenue.

The company’s operations are now gradually returning to normal levels with the opening up of clinics and stores. For the quarter ended March 2020, the company’s gross sales decreased by 5.54 per cent to Rs 206.60 crore in Q4FY20 from Rs 218.72 crore in Q4FY19. Total expenditure for Q4FY20 stood at Rs 187.78 crore as against Rs 196.97 crore in Q4FY19, showing a decrease of 4.67 per cent. Thereby, PBIDT, excluding other income, showed a decrease of 13.43 per cent to Rs 18.83 crore in Q4FY20 from Rs 21.75 crore in the same quarter last year. PBIDT margin, excluding other income, for Q4FY20 stood at 9.11 per cent as against 9.94 per cent in the same quarter last year. 

The company’s PAT for Q4FY20 stood at Rs 11.02 crore as against Rs 10.49 crore in the same quarter last year, showing an increase of 5.05 per cent. PAT margin for Q4FY20 stood at 5.33 per cent as against 4.80 per cent in the same quarter last year. ROCE for FY20 stood at 14.07 per cent whereas the RONW for the same period is at 12.50 per cent as against 11.90 per cent and 12.04 per cent, respectively. The company is trading at a PE of 32x as against a five-year median PE of 34x. By virtue of these factors, our recommendation to reader-investors is to BUY this stock.

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DALAL STREET INVESTMENT JOURNAL - DEMOCRATIZING WEALTH CREATION

Principal Officer: Mr. Shashikant Singh,
Email: principalofficer@dsij.in
Tel: (+91)-20-66663800

Compliance Officer: Mr. Rajesh Padode
Email: complianceofficer@dsij.in
Tel: (+91)-20-66663800

Grievance Officer: Mr. Rajesh Padode
Email: service@dsij.in
Tel: (+91)-20-66663800

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