Stock Pick 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.

HERE IS WHY
Launch of new product called ‘Criticare’
Consistent strong financials 
Amalgamation with Gufic Stridden BioPharma

The bio-pharmaceutical sector accounts for the largest share of the biotech industry, with a share of 62 per cent of total revenues in 2015. India exports to more than 200 countries and its share of exports is expected to grow manifold. India accounts for 20 per cent of global exports in generics. In FY15, the Indian pharmaceuticals industry exported products worth USD 15 billion and the exports are expected to reach USD 40 billion by 2020.

Gufic Biosciences is engaged in the manufacture of pharmaceuticals, medicinal chemicals and botanical products. Gufic Biosciences’ board of directors has approved the scheme of amalgamation of Gufic Stridden BioPharma with the company.

On the financial front, Gufic Biosciences’ revenue increased 34.52 per cent to Rs.120 crore in H1FY17 as compared to the same period in the previous financial year. The company’s EBITDA too jumped 58.91 per cent to Rs.12.89 crore in H1FY17 on a yearly basis. Its net profit at Rs.5.19 crore almost doubled in H1FY17 on a year-onyear basis. Gufic Biosciences’ topline increased by CAGR of 19.27 per cent over the last five financial years ending with FY16. The company’s EBITDA too rose by CAGR of 21.9 per cent in FY12-FY16. Its bottomline too increased 36.76 per cent in the last five fiscal years.

Gufic Biosciences’ net sales increased 33.32 per cent to Rs.202 crore in FY16 as compared to the previous financial year. The company’s EBITDA too rose 36.9 per cent to Rs.19.81 crore in FY16 on a yearly basis. Its net profit also soared 75.96 per cent to Rs.7.32 crore in FY16 as compared to the same period in the previous fiscal. Gufic Biosciences’ debt to equity ratio stood at 1.26x. The company’s ROE and ROCE stood at 23.99 per cent and 24.24 per cent respectively in FY16. It has given a dividend yield of 0.1 per cent in FY16. On segmental revenue front, Gufic Biosciences earned 92.13 per cent from the formulation business, 5.8 per cent from bulk drugs and remaining 2.07 per cent from consumer in FY16. 

On the geographical segmental revenue front, Gufic Biosciences earned 95.46 per cent from India and the remaining 4.54 per cent from out of India in FY16. Gufic Biosciences witnessed increase in revenue because of many factors, viz. launch of a new segment called criticare, and sales in FY16 being more than Rs.20 crore, the pharma segment also experienced a growth of 56.45 per cent, constituting a revenue of more than Rs.11 crore, and the growth in Ayurveda segment was recorded at 53.88 per cent. 

On the valuation front, the share price of Gufic Biosciences is trading at PE multiple of 40.4x as against industry PE multiple of 28.21x. The share price is trading lower as compared to industry peers such as Anuh Pharma (31.27x), Themis Medicare (28x). On strong financials and attractive valuations, we recommend investors to BUY the stock.