Saturday, January 4, 2014

CAPLIN POINT LABORATORIES LTD - ANOTHER AJANTA PHARMA IN MAKING ?




    
 


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Caution :

Contents of this posting mainly based on informations sourced from publicly available documents,data collection and verification through private sources and certain assumptions.Due to some practical difficulties I could not verify the authenticity of  few informations provided here ,hence no guarantee for its accuracy and  prone to higher level of risk. But, to the best of my knowledge , the given informations are correct. Before acting on this recommendation ,do own home work and take decision only thereafter.
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Let us start this new year with a prayer for a good 2014 .Last year SEBI play the spoilsport by the introduction of Periodic Call Auction .This time,by god’s grace ,they realized the drawbacks of this mechanism and already declared many relaxations which is expected to bring lot of relief to small and mid cap investors going forward .


Pharma and IT were the out performers in2013.Since , political uncertainty is  still looming,investment in these sectors are still relevant.Among the pharma pack ,Ajanta Pharma was the biggest gainer in last year.It out performed all biggies with a wide margin. But if we take the top selling drugs in the country it is hard to find any of the products by this company.Then what is the secret of this out performance ?.I believe it is only because of the sterling performance of its ‘Kamagra ‘ brand in overseas markets. This brand gained a sizable market share in Male Erectile Dysfunction segment along with the VIAGRA  brand of Pfizer.Frankly speaking I am not aware about the complexities of manufacturing this product ( Sildenafil Citrate)  ,but it is a fact that only a handful companies from the listed space  making this product , even this segment is growing at a fast pace with good margin.

                                                                                             My search to find out another company active in this segment from mid cap space  ends in a small Chennai based company named Caplin Point Laboratories. Even though this  company not specifically claiming as a producer of this product,  based on the available information ,this is one of the largest exporter of the generic of Sildenafil Citrate from India . Company supplying large quantity to Latin American and African Countries where product registration is enough to sell medicines and regulatory requirements are not tough and also  a preferred supplier for online drug stores .If you are ready to spend few hours in internet with some academic interest ,you can easily gather enough proof for  company’s supply of Sildenafil Citrate through these channels . There may be some solid reasons for the  non disclosure of this fact by the company and I believe they will disclose it once they get a USFDA approval for their new plant which is nearing completion.

                                                                                           Another interesting fact about this company is -  it is a debt free company and getting money in advance for supplying medicines from its distributors ! .Have you ever heared about such a business model in case of a small pharma company in India  ?.More than that ,company claiming that the funding of Rs.75 crore for the new plant is coming from such advances and internal accruals .Since there is no proof for its manufacturing of any critical life saving medicines ,I believe  ,advance payment is only because of the supply of sildenafil cytrate which is in high demand from suppliers to online stores. Apart from this product ,company also exporting many other products to countries like  Guinea, Guatemala, Angola, Mali ..etc  .Company selling such products under its own brand name in these countries .(OTC Product Advertisement HERE ). 

On the financial front ,company is growing steadily in past few  years .Its top line improved from Rs.60 Cr to Rs.122 Cr and net profit galloped from Rs.3 Cr to 14 Cr in last four years.Management of company rewarding share holders proportionately in these years which distributed a dividend of 25 % in latest financial year. Company is now going through a massive capacity expansion program .As part of this ,company is in the process of setting up a  state of the art injectable plant which will cater to highly regulated markets like USA , EU ..etc .It started construction in 2012 and and planning to complete it in three phases .First phase of this plant is expected to start trial run in this month itself .This facility is mainly for sterile injectables and prefilled syringes .There is severe shortage for sterile injectable facilities across the world and big MNC’ pharma players  are in a hunt for acquiring quality assets in this segment.Mylan’s recent buyout of Agila division of Strides Arcolab at a whopping valuation is an indication for the premium valuation for Sterile injectable facilities  worldwide  . Pre-filled syringes is relatively a new concept which is gaining acceptance and potential is very high. Company claiming they have already entered in some agreements with Brazil based firms to distribute products from this facility . This may be a temporary arrangement till the company get the permissions of USFDA and UKMHRA for this facility .Caplin point also expanding its existing manufacturing unit at Puducherry by adding facilities to produce Suppositories, Soft gelatin capsule and Penems.This is also expected to to start production in the second half of this FY. Company already recorded a sales of Rs.40 cr and a net profit of Rs.4 Cr in the first quarter ended in  September ( Company's year ends in June )  ,this  figure is even after deducting a  forex loss of Rs.4.6 cr.

   


 CLICK ON THE IMAGE FOR A BETTER VIEW



Company’s balance sheet is virtually debt free and now it expanding production capacity utilising funds at cheap cost .Company expecting a contribution of Rs.300-400 Cr from this facility when it completely operational.Even if the  company scheduled to start  operations from final phase (phase 3) of this facility by September 2014 ,it may delay by 6 month or so.Even then company can report respectable numbers with productions from phase 1 itself.

In pharma sector ,different companies are following different business models.Some of them are unique in their products developed by own R&D like Biocon..etc ,some of them are unique in production capacity which aims mass production to reduce per unit cost ,like Granules India .In the case of Caplin Point, uniqueness is in its well knitted marketing network across many under penetrated Latin American and African countries.Unlike many other pharma countries which are exporting products to bulk distributors there ,Caplin point established their own offices in these countries and selling of medicines  controlled by their own offices located there.This strategy helping the company to earn higher margins and also to get a clear idea about the changing demand scenarios in that countries.



In nut shell let us summarise the reasoning for a positive view on this company  as below



1)      Company is virtually  debt free

2)      Promoters accepting their faults happened  in the  past and ready to change

3)      Consistently growing in their second innings,turned to a profit of Rs.14 Cr from a loss of Rs.2 Cr in last 5 years.

4)      No hesitation to reward share holders ,increased dividend from 10 % to 25 % in last four years.

5)      Well established marketing network in Latin American and African countries with own offices and infrastructure in these countries.

6)      Supplying ‘products in need’ ,and getting advance payment for supply ,really an interesting business model.

7)      Massive capacity expansion without debt burden ( As per management estimates full capacity utilisation will generate an income up to Rs.400 Cr)

8)      First phase of new plant is ready and   trail run will start  start by this  month end  itself.
     
9)      Already established marketing arrangements for part of the products from the new plant.

10)   Higher promoter holding ,more than 57 %  + 10.38 % held by relatives of promoters under non promoter category

11)   A well accepted supplier of the generic version of Sildenafil citrate to many overseas countries and online drug stores .





If the company can secure approvals from USFDA and other overseas authorities in time,this stock will turn out as a dark horse and a re-rating like the one happened in Ajanta Pharma is a possibility .Even if there is any delay in approvals, it can still improve its performance with the export of products to other countries through existing channels though the margin may be bit lower .Even in that case one can expect reasonable appreciation from the current level. Commissioning  of its  new plant will be a landmark in the history of company which will re-write the magnitude of the operations of Caplin Point .One can buy it  at CMP Rs.86

Stock listed only in BSE with  code 524742

Link to Company website HERE 

Details of new plant HERE

Link to Annual Report HERE

Disc : It is safe to assume that I have vested interest  in CPL

77 comments :

  1. Sir,
    this company was involved in scam in past where there name came up as selling fake drugs.

    The promoter name came up as defaulter and was on interpol list.

    Any view on that?

    ReplyDelete
    Replies
    1. Dear Ashish

      Thanks for raising this point which gives an opportunity to explain the major factor affected its valuation in the past :

      I am aware about the mentioned facts , verified and satisfied with the outcomes .As a point to note,as far as my understanding any medicines selling in USA will be termed as 'FAKE ' or spurious if it is produced by a non FDA approved facility and even if it is available in US only through smuggling without the consent of the original producer.

      On the second point

      It is a past story during 1994-2000 which ends in an escape of main promoter to Angola a country in Southern Africa due to this debt issues .Later this issue settled and he came back and started his second innings.I think ,because of the lessons learned from past experience he now keeping his company as a debt free one. I believe ,accepting past mistakes openly and showing willingness to correct it and not repeat the same mistake again is a positive quality .

      Delete
  2. Sir, thanks for the excellent pick.
    What do you think about Kitex Garments?

    ReplyDelete
  3. really appreciate your info on caplin. Kindly provide your view on orient paper .

    ReplyDelete
  4. Very good company..... I m holding since last 6 years.... Regularly paying dividend....

    ReplyDelete
  5. hope this gets posted.....can u also comment on astec lifescience

    ReplyDelete
    Replies
    1. Already recommended ,still no change in opinion

      Delete
  6. Dear sir may I consider this as 2014 multibegger like marksans pharma
    Thank you

    ReplyDelete
  7. Dear Sir,

    Awesome article on Caplin. Sir i wanted to know about JHS Svendgaard , Jai balaji, jenburt pharmac and polaris financial services. Are these small caps worth investing for. Will they be multibagger like marksans pharma

    Please advise..

    ReplyDelete
  8. Thanks for the excellent pick :)
    Whats your view on LUMAX AUTO TECHNOLOGIES at the cmp of 105 ?

    ReplyDelete
  9. Respected Sir,

    Happy new year.I just hope all the recommendations given by you this year turn out to be multibaggers as it happend in the last few years.

    Sir I have 2 queries:'

    1.What is your opinion on HSIL.They being the market leader in sanityware segment,and the kind of expansion plans they have,Can we buy this stock?Will it be a multibagger given the good promoters they have?

    2.Sir I was just hoping to see a new year stock pick from you...Till now i am waiting for it :)....On 31st I saw u again recommending liberty shoes as a long term bet.Can i assume that it will be the new yr pick from you and will be a wealth creator or multibagger even from current levels.

    Please do reply

    Thanks in dvance

    ReplyDelete
    Replies
    1. Positive on HSIL ,as a long term pick

      We have three new years in an year

      Beginning of Financial Year

      Beginning of calender year

      and

      Diwali ...:)


      Delete
  10. Hello Sir,

    Please give us your view on l& t Finance.Is it a good stock to buy for long term?

    Please do reply

    Thanks in advance

    ReplyDelete
  11. Sir,

    Any view on Thomas Cook India?

    ReplyDelete
    Replies
    1. Positive on Thomas cook for long term

      Delete
  12. Sir, what do you think about Jamna Auto?

    ReplyDelete
  13. Sir, what do you think about PG Foils?

    ReplyDelete
  14. Dear Sir, Can buy share of Aushapura Minechem at the current market price as it was entered by some mutual funds. please comment. Thanks and Regards .. Ramana

    ReplyDelete
  15. What about Morepen

    ReplyDelete
    Replies
    1. Morepen have lot of obligations to be cleared in 2014 ,earlier in the past they defaulted repayment of redemption money and also there is court cases between company and its fixed deposit holders . Management quality is not good as Marksans .Purely on fundamental basis - a very risky bet ,but if there is momentum in small pharma stocls ,you may get something .Timing of entry and exit is the key

      Delete
  16. Sir,
    Amara Raja Batteries is correcting now, earlier you had recommended this stock. I already have some with avg price Rs 251, wants to add more. Please specify the region to accumulate.

    Whats your opinion on Emami Ltd and Bajaj Corp.

    ReplyDelete
  17. sir ur view on ivrcl & ibpower

    ReplyDelete
  18. Sir, Any view on BGR ENERGY ?? Please do reply as I am holding 3200 BGR @ 324 avg rate.

    ReplyDelete
    Replies
    1. Positive on BGR @ current price but only for long term.

      Delete
  19. Hello Friend,
    I am floored completely with the kind of diagnosis you have done for each pick that you choose, which makes life simple for novice investors like us to assess any scrip before taking any decision.
    With regards to this pick (Caplin) - I'm gonna take chance.
    Also, another stock which has been great pick you had recommended was Marksans Pharma(MP) - I invested and earned - now I am out completely - do you recommend me to reenter this stock (MP), and if I may take a corroboration of your point number 4 in reference to Caplin - (4) No hesitation to reward share holders ,increased dividend from 10 % to 25 % in last four years.) where do you consider the policy of MP.
    Would be happy to get your valuable comments,
    Salim

    ReplyDelete
  20. Dear sir, presently i am holding Advanta 500 shares at 126 post split. can i still hold the same in the present scenario. please give me your comment. Regards Ramana

    ReplyDelete
    Replies
    1. Advanta had a one time exceptional loss in last quarter which affected its result on a consolidated level.I hope performance will improve going forward

      Delete
  21. Sir,

    I think you research and get info which even the management of the company might not know or will be surprised to know... truly unbelievable.

    Please provide your view on Astec Lifescience...

    Thanks,
    Sunil

    ReplyDelete
    Replies
    1. This stock already recommended and still positive on it.

      Delete
  22. Hello sir, I have recently visited your website a month ago, the investments ideas that you share among the small investors like us is a boon for us, thanks a lot, I had made some investments in companies like mothersun sumi, Gujarat pip av port, wockhardt, can you please give your advise on these companies I am intresred in holding them for 5 years or more than that, thanks, shailesh

    ReplyDelete
    Replies
    1. Positive on Motherson Sumi and Wockhardt for long term,not tracking Pipavav

      Delete
  23. sir
    pl advise me on avt natural product and jhs sevenguard

    i am holding this stock for m long time ;; and i need yaur help
    thanks to u
    neeraj

    ReplyDelete
    Replies
    1. Lot of insider selling is happening in AVT Natural in recent times .So neutral on this stock

      At least 10 times in the past two months I expressed my negative view on JHS

      Delete
    2. Sir,
      I will tell you why there is so many enquiries for this stock. There is one more good hearted person like you who gives excellent investment ideas. He has been recommending JHS for long term and he is adamant and this will touch 3 digits.His tips have also been successful like you.

      Delete
    3. My dear friend

      I can express only my own opinion and not interested to contest with any other's view.

      As far as my understanding ,JHS Svenguaard is only a contract manufacturer on job work basis for companies who originally owns the brands like Colgate ,P&G ..etc.These type business model always running with thin margins and at the mercy of big cos who own brands .Last year there was a dispute with P&G and still the case is in the court and P&G stopped the sourcing from JHS.

      More than that ,I am not comfortable with the past of the promoters of JHS.About 10 -15 years back they came out with another company in the similar line of business ,collected money through IPO and later disappeared from the exchanges.I don't like to advice my readers to take risk if risk reward ratio is not favorable.

      Delete
    4. Thanks a lot. I agree with your opinion. I like your work.God bless you

      Delete
  24. Sir I am a new comer to nifty.I do not know which one I have to select with correctly for buying and selling.Kindly guide me sir
    Thank you

    ReplyDelete
  25. Actually I am not sure what you intended to say by "new comer to nifty " .NIFTY is an index of NSE .First try to spend enough time to learn the working of market ,its terms and working and the business behind each names listed in exchanges. Don't take decisions based only on tips but try to generate own conviction by gathering maximum information about companies you are interested .Then try to do some virtual trading (only on paper or so ) to check the success of your decisions .Then only invest in real terms. No need to hurry ,market and opportunities will be here always ...

    Never try to trade in market as a new entrant ,stick only with investment

    Never leverage - buy only with the available funds without any debt

    Never use time bounded fund or funds kept for any other purpose for buying stocks

    Invest whatever available beyond savings ,in stock market

    ReplyDelete
  26. Sir,plz advice me on APOLLO HOSPITAL,TECH MAHINDRA &TATA GLOBAL
    I read daily ur blog many time a day as addicted to it

    ReplyDelete
    Replies
    1. Generally looking into small/mid/micro caps.

      Delete
  27. I have 2000 share of ak capital at 278 rs. What is your view sir for long term please advise me i am in huge lose

    ReplyDelete
  28. Sirji Madan J Hinduja & Dinesh J Hinduja are still selling Gokex Shares in open market for the last month, even on upper circuits.. Do u find anything suspicious...

    ReplyDelete
    Replies
    1. They sold their entire company few years back,now selling the remaining stocks

      Delete
  29. sir,
    my question not coming up.

    Any view on Shasun Pharma at current levels?

    ReplyDelete
  30. Hi Value pick sir,

    What do you think about Empee Distilleries? Is the management good?

    ReplyDelete
  31. that was awesome..20% in two days...thumps up for that pick..

    ReplyDelete
  32. Sir, your viewpoints on Silpa Medicare and Alembic Pharma?

    ReplyDelete
    Replies
    1. Positive on Alembic ,enter in correction.Not tracking Shilpa

      Delete
  33. the problem is that any view you post,the next day it just shoots up...a investor like me can never buy at ur price...any suggestion please

    ReplyDelete
    Replies
    1. While selecting any stock I will consider two factors viz value element and growth element in that stock.If a stock is under valued based on the fundamentals at the time of recommendation ,it may corrected immediately after recommendation and move up continuously till the deserving value reaches at the share price. But there is still scope for appreciation based on the growth of business which will happen over a period of time based on the subsequent results.Normally I will not recommend any stock, if I feels its potential ends only in one or two circuits based on its growth prospects.

      Delete
    2. exactly, we cant buy it on monday and later we buy it at higher price when others offload. but keep in mind its long term play, enter the bus sooner or later! what say sir ?

      Delete
  34. sir , my query is not being answered.. i have been posting my query on ORIENT BELL. Please give advice at CMP

    ReplyDelete
    Replies
    1. Practically difficult to answer on a daily basis for same company .In last one month ,query on same stock replied at least 5 times.

      Delete
  35. Dear Sir,
    I have been visiting your site these days & going thru the excellent articles in ur blog, From my Deep of my heart, May god bless you & your family for the wonderful work you have been doing and please keep us informed of your excellent analysis & picks always.

    ReplyDelete
  36. Dear Vp sir,
    What a excellent reply. I think many of us have similar doubt which u cleared in one go. Thanks
    Nirav S. Karia

    ReplyDelete
  37. Dear Sir,
    This is second or third time that that i am writing to you. Would appreciate your view on this.

    I have been tracking your recommendations since last 1.5 years. They are fabulous..you have got a very futuristic vision to identify the potential multibaggers. You are doing a great job.

    I need one advice from you , i want to invest Rs. 50,000 to 80,000 in one stock. Out of Acrysil, sunshield chemicals, superhouse and Liberty shoes which one stock would you think would be worth investing this amount. I am a longterm investor.

    Do reply.

    Best Regards and thank you

    ReplyDelete
    Replies
    1. Only you know your risk taking capacity ,fund flow, holding period,sector preference ..etc.I can only point out the possibilities about a company and decision should be taken by yourself after further self study

      Delete
  38. Thanks a ton VP Sir,I'm just new on this blog and catching out some records.My question is about to enter in NITCO at CMP for 1.5 to 2 years.What's your advise on it?

    ReplyDelete
  39. Sir,

    Whats your opnion on GVK power and infrastructure. please advice?

    ReplyDelete
  40. Dear Sir,

    Any follow up story/details on Panacea Biotec? The stock is not moving, may be it is tiring the investors. Your view whether hold/buy or sell?

    ReplyDelete
  41. Dear Sir,

    I was studying Indrapratha Medical Corporation. This is Appollo Hospital Group Company and maintiaing Dividend of 16%. Yield work out to 5% Approx.
    What is your view on this, Whether to invest or not to invest.

    ReplyDelete
  42. Sir, I want to know about JSW Holding and Nalwa Investment. Please give your views.

    ReplyDelete
  43. Dear Sir,
    I have 17 stocks in my portfolio. I am a long term investor (10years). now i would like to keep in my portfolio 10 stocks only (wealth create and good dividend payout). please give priority for long investment the below stocks.
    1. Amaraja Batteris
    2. Motherson Sumi
    3. ICICI Bank
    4. SBI Bank
    5. Dabur
    6. HUL
    7. Pidilite Ind
    8. Dhanuka Agri
    9. Kaveri Seed
    10. Century Ply
    11. Kajaria Ceramics
    12. Asian Paints
    13. Supreme Ind
    14. Astral Poly
    15. La Opala RG
    16. Mayur Uniquoter
    17. Wipro

    ReplyDelete
  44. Dear Sir,

    What is your view for Caplin Point Labs at current market price. SELL or HOLD or BUY????

    ReplyDelete

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