Saturday, November 17, 2012

SPAN DIAGNOSTICS LTD - BUY




 
 













In a country like India with huge population ,healthcare industry is considered as a promising one and it is showing good growth rate in recent times.Increasing education level and  disposable income,better awareness and various health schemes of governments acting as the catalyst for this rapid growth .Availability of better hospital facilities and awareness of patients  increasing the potential of the players in medical diagnostic Industry.Periodic outbreak of various diseases at various parts of country ensures sustained business for this industry as a whole. Span Diagnostic is a strong player in this industry which is manufacturing and distributing various kinds of diagnostic/pathology lab devices, including sample test devices and regents.SPAN originally started its operations in 1973 as  as Desai Laboratories and changed its name to SPAN DIAGNOSTICS in 1980.This Surat based company having strong technical and marketing alliances with well known global  players like Hitachi Chemical Diagnostics USA,Technoclone GMBH Austria,Biotechnica Instruments Italy ..etc. and having a nationwide marketing network .  At present a major portion of company’s income is coming from reagents manufacturing business for  Immunology, Biochemistry, Microbiology, Serology  and Histopathology .Increasing trend of lifestyle related diseases ensuring sustained growth in this segment.Company is a market leader in testing kits for AIDS and Maleria and a major supplier of testing kits for  government sponsored health programmes. Span also having an approved facility for antibody productions and their purification.

                                                  Company reported steady growth till 2011 and rewarded its minority share holders accordingly .But in last year Span recorded a loss(excluding extra ordinary income) ,thanks to its wrong decision to devote money and effors for developing  its  medical equipments business and overall sluggishness in economy.I feel ,now company realised its mistakes and taking corrective steps .Their decision to sell Hematology analyzers  business to Nihon Kohden India Private Limited and concentrate in their core business of diagnostic reagent manufacturing is part of their changing strategy .In order to tap the export market  company started a joint venture Span Diagnostics South Africa (PTY) Limited with Reindus Health (Pty) Limited for increasing its presence in African Market. Company also planning to enter in US market in near future . SPAN is also planning to aggressively tap the contract manufacturing opportunities for regents.In latest September quarter company reported sharp improvement in its performance where sales increased from Rs.15 Cr to Rs.25 Cr and net profit improved sharply from Rs.56 lakhs to Rs.2.26 Cr .Quarterly EPS is Rs.3.16.To scale up its business to next level,company having plans to sell part of its stake to MNC’s at right valuation.Considering the huge potential of this industry and goodwill of this company we can’t rule out the possibility of such an alliance with global diagnostic majors .If such an alliance materializes that will re write the fortunes of SPAN. On good September results its stock price appreciated recently and now consolidated around Rs.40 .Those with a long term view  may consider SPAN @ CMP of Rs.43.


Link to company website HERE

Link to latest Annual Report  HERE

84 comments :

  1. Dear VP,

    Thanks for this pick!

    What is your view on Britannia at CMP, do you think they would be able to either sustain and improve margins in view of rising competition and raw material cost?

    ReplyDelete
    Replies
    1. There may be some margin pressure in near future but there is chances for brand extension to other high margin products in medium to long term

      Delete
  2. Hi Sir..
    Pls suggest me abt Bilcare..
    Thanx in anticipation..

    ReplyDelete
  3. Hello vp sir
    What's your view on insilco and eveready? My view is of around a year.

    Thanks

    ReplyDelete
    Replies
    1. Not expecting anything more than market performance from both these cos in one year.

      Delete
  4. Dear Sir,
    Please suggest for Rei Agro & Gulshan Polyols for long term view.

    Regards,
    Mahesh

    ReplyDelete
    Replies
    1. Not sure about the management quality of both these companies,hence no comments.

      Delete
  5. Dear Valuepick
    Sir What is the reason for such dismal result of Premier Explosives. Hold or exit.
    Regards
    Sunil

    ReplyDelete
    Replies
    1. General sluggishness in mining sector and production disruption due to an unfortunate explosion in one of their production facilities may be the reasons.

      Delete
  6. Hello Sir,

    Do you like Maxwell Industries as a brand play?

    ReplyDelete
    Replies
    1. Promoters are not showing ability to scale up the business and moving to the value chain .

      Delete
  7. Sir
    Laopala seems a super pick ,any idea about their expansion plans.

    ReplyDelete
    Replies
    1. company's one expanded facility will start to contribute from this year and another from next year onwards.On the completion of this facilities company is planning to tap the hotel segment(star hotels) which will be a new revenue source for the company.

      Delete
    2. On the consumption front - what is your take on Wim Plast .promoter have now acquired 75% stake. Their new plant is operational next quarter.

      Delete
    3. navin fluorine - promoters believes in Charity. they declared dividend 3 times this year.

      30/10/2012 Interim Dividend 7.50
      11/06/2012 Final Dividend 6.50
      11/06/2012 Special Dividend 60.00 <---

      Sir, Few of your followers have asked this question and we are still waiting for the answer. I understand no answer means you are not tracking the stock. Just checking if this has deserved a place in your track list in the recent time.





      Delete
    4. Dear Deepak

      A major portion of this cos bottom line is coming from the sale of Carbon Credits ,quantum of which is unpredictable and erratic in each year.Market will always give low discounting for companies with higher percentage of unpredictable profit in their overall performance.

      Delete
    5. Wimplast already covered ,see the link below :

      http://value-picks.blogspot.in/2011/07/nilkamal-ltd-wim-plast-ltd-due-for-re.html

      Delete
  8. Sir,
    Your guidance on Granules will be extremely helpful.
    Do you see the price correcting to recommended levels as I bought and remained with a strategy to buy and hold good companies and now little nervous seeing the fall after excellent results.

    Saket

    ReplyDelete
    Replies
    1. Dear Saket

      Be an investor in a business not an investor in stock market.If company's business showing growth ,investors will rewarded ultimately.

      Delete
  9. Dear VP,

    What is you view on Torrent Pharma. I have seen your comment HOLD in almost 5 queries in the blog. Can you please give a detailed view on it and can we compare its facilities with Wockhardt or atleast Ipca Labs. Its market cap seems to be less compared to its sales, profit & assets.

    Regards

    Neil

    ReplyDelete
    Replies
    1. Dear Friend

      Many investors are thinking only the numbers are deciding share price.Even this is the most important point this is not the only one.Even the image of promoter group may affect stock price .This image depends on many factors like promoters business strategy ,quantum of floating stock ,willingness to share profit and even the efficiency of PR and corporate communication standards ..etc.This is the reason two companies with similar financials getting different valuation.Take the case of Torrent group ,this group having an image of a conservative management .Sometimes market may see such an image even as positive especially in the case of debt level.. etc.In another case, it is a common fact that many managements are supporting stock prices of their own companies .Such companies may get higher valuation .So what I mean is numbers are not the only factor deciding stock price .Conservative managements are good for investors who are not interested to take higher risk and expecting moderate return .So no meaning in comparing one company with other one only on the basis of numbers even both are operating in the same industry.

      Delete
  10. Hello vp sir.
    whats your vieew on FDC ?

    ReplyDelete
  11. Do you track Amal ltd ?

    ReplyDelete
    Replies
    1. Yes ,company is related with the promoters of Atul Ltd.It is a Sick company now but chances are there for a turnaround in another few years .

      Delete
    2. Are you tracking Hester biosciences ltd?

      Delete
  12. Sir,

    Referring to your comment about Liberty shoes yesterday. Do you think, in view of selling by promoters, one should exit the stock (if bought earlier) or it is better not to create fresh long positions?

    ReplyDelete
    Replies
    1. It is a real cause for concern,better to exit

      Delete
  13. Hello VP,

    Do you like First Leasing? Any comment on the promoter group and their concern for minority shareholders?

    ReplyDelete
    Replies
    1. Not a good opinion about this business group(SPIC- Muthaih).May re rate if there is any chance for a change in management.

      Delete
  14. Hello sir,
    please let me know your views on spanco ltd

    ReplyDelete
  15. Dear sir, What's your view on Sandesh ltd ? Isn't the co undervalued presently ? Eager to know your views on its future performance & the sector in which Sandesh is operating ?

    Regards

    ReplyDelete
  16. hi Sir,
    Is it good to hold hindalco bought at 114.

    ReplyDelete
  17. sir how will you review Advanced micronic devices one of ur old reco. and on the same line of business like span diag.?

    regards

    ReplyDelete
    Replies
    1. Not in the same business .one is in medical devices and another in Regents.

      Delete
  18. Sirji
    Pls comment on SHIV-VANI OIL & GAS EXPLORATION
    rgds
    BRK

    ReplyDelete
    Replies
    1. Good company in the hands of bad promoters.

      Delete
  19. Sir,
    BIOCON moved very well to 324 and then fell of to 291 levels. The announcement from the company was very good but wondering why such a fall instead of 10-15% correction?

    It seems traders are creating big volatility and making retail investors nervous. Earlier also when Pfizer deal was cancelled it corrected big.
    Do you see such big correction or just the volatility which we can ride on.

    Thanks Amit.

    ReplyDelete
  20. Dear VP,

    Do you like Sona Koyo Steering and their attitude for shareholders at this price?

    ReplyDelete
  21. sir are you still bullish on Astec Life Sciences? why the price fell over the last one year?

    ReplyDelete
    Replies
    1. Struggling to grow business ,wait few more quarters and then take a decision.

      Delete
  22. Hi, Any change in view on Vijay Shanti Builders considering that promoters reduced their stake considerably.

    ReplyDelete
  23. Thanks for your reply sir. I need to invest in small caps for a year,is south indian bank a proposition for it. What's your view on orchid chemical now?

    ReplyDelete
    Replies
    1. No opinion about time bounded investment.

      Delete
  24. hello sir.............very thankfull for the return generated from your given recommendation.It will be very thankfull if give your views on Good luck steel ltd and innoventive industries.As i find lot of scope in it.

    ReplyDelete
  25. Dear sir today granules close at 166 .can we buy now at current c.m.p ? Because earlier we miss the bus.

    ReplyDelete
  26. Hello Vp,
    whats your take on Zylog Systems ?
    Looks like a bargain at these levels.

    ReplyDelete
    Replies
    1. Why it is not a bargain buy for promoters even at these levels.?

      Delete
  27. Sir, SPAN - IMO- its MCAp is 30 CR…QTLy sales is 25 cr..it can easily have medium target of 100Rs - with a normal Mcap/sales ratio of 1 in next 3 quarters..

    ReplyDelete
    Replies
    1. VP sir,
      Good stocks like Granules, Aditya Birla chem don't rise but cheap value (Rs wise) rise and hit circuits.

      People have found a nice way to make money and then hit lower cicuits. Bambino is a good example.

      No wonder the recommendations are good but traders and people who read this sites have found a way to make fast money. Pitty for small investors like us. Always get trap. BIOCON & GRANULES Inda are good examples.

      But I am renaming invested for better times though now Margin of safety doesn't exit.

      Delete
    2. Hi,
      i feel its based on the mood and sentiments of market, when bull market starts, valuation may be justified with pe, later pe may get expensive so most financial advisors start to look for other parameters to justify why stock should fetch high :) like sales to mcap, book value to share price etc.
      what i feel growth, free cashflow, return on equity and goodwill will matters with most businesses for getting good valuation. i never had a bad run in my investments based on these parameter, where ever i missed to follow these i got the punishment as well.
      Tom

      Delete
  28. Dear Valuepick
    What is your view on Swelect Energy system.
    Regards
    Vinay

    ReplyDelete
  29. Dear Value Pick Sir,
    What is your opinion on CEBBCO many broker houses are giving buy call and new targets. Kindly provide your view.

    ReplyDelete
  30. Dear Value Pick Ji,
    I am holding Liberty Phosphate 200 shares since last 2 years. Today i read a notice on BSE website http://www.bseindia.com/xml-data/corpfiling/AttachLive/Liberty_Phosphate_Ltd_191112_SAST.pdf
    Is it good for Liberty Phosphate.
    Pawan Kumar Verma

    ReplyDelete
  31. Sir

    Are you recommonding Aries agro again?

    Rgds

    ReplyDelete
  32. Sir, What about Dolphin, it is going down soo much. what happened sir? Should we book profit?

    Arjun Kidao

    ReplyDelete
  33. Dear Sir,

    What are your thoughts for buying Opto Circuits?

    Great Day,
    Raghav Simlote

    ReplyDelete
    Replies
    1. Better to consider after some clarity emerges about their plan to dilute their stake in Subsidiary cos .

      Delete
  34. Dude care to tell a sugar stock? Renuka sugar is below 30/-
    Is is investable?

    ReplyDelete
  35. Thank you sir for your quick reply, but everyone say then you need to fix your time horizon and accordingly start investing.

    ReplyDelete
    Replies
    1. If you fix a time and using time bounded funds what will happen if the entire mood of market is bad at that particular time ?

      Delete
    2. True sir, that could lead to a very bad financial scenario. Thanks for your help sir.

      Delete
  36. Dear VP,

    Sobha Developers, its seems value buy. What is your opinion on the stock.

    Regards

    Neil

    ReplyDelete
    Replies
    1. one of the few good cos from this sector.Every chance to outperform once market re rates reality sector.

      Delete
  37. Dear Value Pick Sir,
    Please provide your valuable opinion on Globus Spirit. Is this company worth investing at the moment.

    ReplyDelete
  38. Dear VP sir,

    only based on management quality and the potential of the products, which one would you prefer: Yuken or Veljan Denison? I read your old reports on these companies.

    ReplyDelete
  39. Dear Value Pick,

    Am a beginner in Share market. I have been very keen to learn and develope background in share market. Your Blog has been a good guidelines for finding a value stocks with our own stock. Value pick I personally feel , If you provide a post to identify value stocks.. It would be really great..

    We are really need to thank you for your support..

    Thanks!

    ReplyDelete
  40. VP sir,

    What is your view on Essar Oil/Videocon industries. Videocon today hit UC 20%

    ReplyDelete

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