The company
was started in 1990 as a private Limited company mainly to manufacture a wide
range of Ointments, Creams and other External applications in addition to the
regular segments of pharmaceutical formulations. In 1994, Caplin Point was
converted into a Public Limited company and the public issue was successfully
oversubscribed by 117 times which is a record in the Pharmaceutical industry in
India. The entire proceeds of the public issue were deployed in the
manufacturing facility at Pondicherry spanning 51k sq. ft.
With the
merger of May (India) laboratories P Ltd, Chennai in 2006 and Malind
Laboratories P Ltd, Baddi in 2009, Caplin Point had substantially increased its
production capacity to cope up with the growing demands of the markets. Caplin
Point has already started constructing its latest and largest project, a
facility that would be in compliance with US FDA, UK MHRA, and other regulatory
bodies for multiple dosage forms such as liquid injectables, ophthalmic drugs
and lyophilized bio-tech products which is expected to be completed by mid-2013.
Business Model
The
company has over 1500 products registered in various countries. It follows a
unique business model for this it has set up sale points at strategic locations
in Central/South America and various parts of Africa. This way, the company is
not only the manufacturer and exporter, but also the importer and distributor
of its products by its collaborators. It also envisage creating a retail chain
and reach the end users with an innovative product basket that would include
Caplin Point’s own products and other consumables by direct marketing. With
this, the whole spectrum of business involving the Manufacturing, export,
import, distribution and retain sales is covered.
Financials
Annual results:
(in
Cr.)
|
2011 -
12
|
2010 -
11
|
2009 -
10
|
2007 -
08
|
2006 -
07
|
Income Statement
|
|||||
Revenue
|
107.47
|
83.96
|
60.71
|
58.62
|
39.09
|
Other Income
|
2.46
|
1.57
|
1.77
|
2.04
|
--
|
Total Income
|
109.94
|
85.53
|
62.48
|
60.67
|
39.09
|
Expenditure
|
-97.13
|
-75.06
|
-57.07
|
-60.81
|
-34.79
|
Interest
|
-0.82
|
-1.05
|
-0.83
|
-0.83
|
-0.63
|
PBDT
|
11.98
|
9.42
|
4.57
|
-0.97
|
3.67
|
Depreciation
|
-1.16
|
-1.11
|
-0.93
|
-0.86
|
-1.35
|
PBT
|
10.83
|
8.32
|
3.65
|
-1.83
|
2.32
|
Tax
|
-2.65
|
-1.82
|
-0.32
|
-0.13
|
-0.87
|
Net Profit
|
8.18
|
6.49
|
3.33
|
-1.96
|
1.44
|
Equity
|
15.11
|
15.11
|
15.11
|
13.01
|
13.01
|
Reserves
|
--
|
--
|
6.59
|
--
|
0.98
|
EPS
|
5.42
|
4.3
|
2.21
|
-1.51
|
1.11
|
CEPS
|
6.18
|
5.03
|
2.82
|
--
|
--
|
OPM %
|
11.92
|
12.47
|
8.91
|
-0.24
|
11
|
NPM %
|
7.61
|
7.73
|
5.49
|
-3.34
|
3.69
|
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As easily visible from the annual
results the company’s revenue and net profits are growing more than 25% in last
two years. Over the same period the company is able to expand both its
operating margins and net profit margins by more than 200bps.
Quarterly:
(in Cr.)
|
30-Jun-12
|
31-Mar-12
|
31-Dec-12
|
30-Sep-12
|
30-Jun-12
|
Jun-12 (Annual)
|
Income Statement
|
||||||
Revenue
|
32.99
|
26.24
|
27.15
|
21.37
|
28.05
|
107.47
|
Other Income
|
0.61
|
0.57
|
0.73
|
0.55
|
0.44
|
2.46
|
Total Income
|
33.6
|
26.81
|
27.88
|
21.92
|
28.5
|
109.94
|
Expenditure
|
-29.95
|
-22.96
|
-24.66
|
-19.83
|
-26.34
|
-97.13
|
Interest
|
-0.16
|
-0.18
|
-0.23
|
-0.25
|
-0.3
|
-0.82
|
PBDT
|
3.49
|
3.67
|
2.98
|
1.84
|
1.86
|
11.98
|
Depreciation
|
-0.31
|
-0.29
|
-0.28
|
-0.27
|
-0.26
|
-1.16
|
PBT
|
3.18
|
3.38
|
2.71
|
1.56
|
1.6
|
10.83
|
Tax
|
-0.35
|
-1.3
|
-0.66
|
-0.34
|
-0.43
|
-2.65
|
Net Profit
|
2.83
|
2.08
|
2.04
|
1.23
|
1.17
|
8.18
|
Equity
|
15.11
|
15.11
|
15.11
|
15.11
|
15.11
|
15.11
|
EPS
|
1.88
|
1.38
|
1.35
|
0.81
|
0.78
|
5.42
|
CEPS
|
2.08
|
1.57
|
1.54
|
0.99
|
0.95
|
6.18
|
OPM %
|
11.07
|
14.67
|
11.84
|
9.77
|
7.71
|
11.92
|
NPM %
|
8.59
|
7.93
|
7.52
|
5.74
|
4.18
|
7.61
|
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The same growth story is visible
in the quarterly results of the company.
Investment rationale:
<!--[if !supportLists]-->1. <!--[endif]-->After
the initial hick ups of mergers and court cases. The company is consistently
growing since last four years. It’s a minority shareholders friendly company
with the dividend payout for last two years @ Re 1 per share for FY 2010 and @
Rs 1.5 per share for FY 2011. This years the company should pay a dividend of
Rs 2 per share.
<!--[if !supportLists]-->2. <!--[endif]-->Strong
promoter holding: Promoters shareholding in the company is more than 57%
<!--[if !supportLists]-->3. <!--[endif]-->Profit
margins of the company are rising coupled with increasing sales leading to
higher EPS. Thus, lower PE after each results assuming the share price does not
move from the current levels.
<!--[if !supportLists]-->4. <!--[endif]-->Strong
growth potential: Pharma normally trades at premium PE of 20 to 40 giving room
for strong upside from the current price levels.
Target price:
Pharma being a defensive sector
command a premium PE wrt the market but this stock is not able to outperform due to historical issues and stock PE’s is not reflective of the market realities. The stock has risen
more than 100% in last six months since my first recommendation. Still
the stock is trading below the PE of 10 assuming a conservative PE multiple of
20 (compared with an average of around 35). The stock has the potential to
reach Rs 125 in next 12 to 18 months.
Disclaimer: I own some shares in the company since 2005
The stock hit 3 Upper circuits and 3 lower till now in last 5 days. The stock is fluctuating a lot in last few days. We are committed to be truly transparent wrt blog. So, I would like to disclose that none of the Authors or related people (immediate family, friends or business partners) to the blog have transacted in this stock in last 2 years at least.
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