Stock Analysis: Beta Drugs

Beta Drug : Its s NSE SME stock trading at 62.

Market is going through severe correction specially in the small cap and mid cap space. In my view these are great times to build a great portfolio for the next level of bull runs

1) Because of the recent selloff the company share price has corrected >60% from its all time high of 200 to nearly Rs 60 currently thus trading at P/E of 8 which is extremely cheap considering the average industry P/E of 25 in Pharma sector.

2) Beta has a portfolio mix of more than 50 different medicines. The company’s medicines are available in 70% of the corporate hospitals in India such as Apollo, Max, Lillavatti, Nannavatti, HCG, Fortis etc. It also has exclusive tieups with Kerala Govt’s/Adhyar Cancer Institutes of being an exclusive supplier of cancer medicines through different govt yojnas/schemes. Beta is also a supplier for Gujarat Cancer Research Ahmedabad.

3) Indian pharmaceuticals industry is globally respected and is one of the most successful industries in India. It has contributed immensely to Indian‘s healthcare outcomes and economy. In addition to helping ensure affordable and accessible medicines in the far reaches of India, it also generates employment, directly or indirectly hiring around 2.5 million people. Affordability and accessibility of India pharma products has improved in domestic as well as international markets. The industry‘s strong initiatives to drive access and awareness across all regions of the country have resulted in around 50 per cent higher drug penetration in rural India. India continues to be the primary supplier of essential medications for numerous disease areas worldwide, helping save millions of lives every year

4) Indian pharmaceuticals industry is well respected worldwide and is one of the most successful industries in India contributing greatly to country’s healthcare outcomes and GDP. Top notch capabilities and advantageous market conditions over the last many years have ensured that India continues to be one of the most profitable pharma markets across the world. It remains an attractive destination for generic R&D and manufacturing of pharmaceuticals owing to its strong capabilities across the value chain. Oncology drugs market is expected to grow at a fast clip across the world primarily driven by an ageing population and lifestyle changes making population susceptible to cancer. In India the Oncology drugs market is expected market to grow in double digits for the next many years to come. Therefore, Beta Drugs being a leader in the oncology segment has long runaway ahead both in terms of opportunities and growth.

ROAD AHEAD
 • Expanding presence in international markets; to open at least 10 non-regulated markets this year 
• To increase market share of our own branded drugs
• Inorganic growth opportunities
• Research & development led growth; launch niche molecules by 2019-20 
• Focus on cost rationalization and efficiency initiatives
• To obtain registration of European Union GMP by end of FY 18-19
• To commission new block by October, 2018 and upgrade all machinery to 21-CFR for a better compliance at international level

Products of company

5) Financial overview:

Beta’s net sales grew by 21.40% to Rs 50.56 crores compared with the same period a year ago. This was primarily driven by company increasing its market share in the domestic oncology segment. Beta added some marquee names to its clients list and expanded its presence across corporate hospitals in India. The company’s medicines are available in 70% of the corporate hospitals in India such as Apollo, Max, Lillavatti, Nannavatti, HCG, Fortis etc. Net profit too surged by 58% to Rs 6.76 crores. This increase in net profits was due to the fact that the company was able to reduce its operating expenses. This also reflected in margins expanding across the board. Net margins increased by 314 basis points compared with the same period a year ago.

Profit & Loss
Report Date	Mar-15	Mar-16	Mar-17	Mar-18
Sales	0.26	26.38	41.65	50.57
Operating Expense	0.26	23.36	34.36	41.12
Raw Material Cost	0.26	15.33	23.32	28.61
Change in Inventory	0.11	0.2	-0.46	0.41
Power and Fuel	0	0	0.75	0.89
Other Mfr. Exp	0	0	0.67	0.97
Employee Cost	0.09	3.17	3.87	5.08
Selling and admin	0	0	4.47	4.84
Other Expenses	0.02	5.06	0.82	1.14
Operating Profit	0	3.02	7.29	9.45
Operating Margin (%)	0.0%	11.4%	17.5%	18.7%
Other Income	0	0.02	0.03	0.24
Depreciation	0.1	1.24	1.24	1.85
Interest	0.02	0.66	0.82	1.01
Profit before tax	-0.12	1.13	5.25	6.84
Net profit	-0.11	1.13	4.27	6.76

BALANCE SHEET
Report Date	Mar-15	Mar-16	Mar-17	Mar-18
Equity Share Capital	1.01	1.01	1.01	8.65
Reserves	0.06	1.19	5.06	24.23
Borrowings	4.77	8.34	8.21	7.67
Other Liabilities	2.17	4.66	8.93	9.03
Total	8.01	15.2	23.21	49.58
Net Block	0.55	7.34	8.11	13.19
Capital Work in Progress	5.71	0	0	1.35
Investments	0	0	0	0
Other Assets	1.75	7.86	15.1	35.04
Receivables	0.08	4.4	10.51	14.44
Inventory	1.28	2.86	2.4	2.8
Cash & Bank	0.06	0.13	0.14	11.91
others	0.33	0.47	2.05	5.89
Total	8.01	15.2	23.21	49.58
CASH FLOW:
Report Date	Mar-15	Mar-16	Mar-17	Mar-18
Cash from Operating Activity	1.39	-0.37	4.74	17.1
Cash from Investing Activity	-5.71	-2.3	-2	-10.79
Cash from Financing Activity	4.37	2.75	-2.72	5.45

6) Company has wide range of products and as mentioned earlier due to lifestyle change the demand is expected to be robust thus expecting company to continue to grow at 30-40% P.a. P/E based upon expected forward earning for FY20 at current market price of 62 is around 4.5 which is cheap esp considering this sector

Please note that i am not a SEBI registered analyst. This is for educational purpose and my views might be biased given i have holding in this company.

General: No Paid services

Hi All

I have got multiple emails till now that if I do provide paid investment service. I DON'T and don't have any intention to provide in near future. I love to analyze companies and file potential multi-baggers. My investment philosophy over the years has helped me to pick up stocks which are not yet recognized by market however given most of the stocks are micro-cap, it carries the risk that with time the story may not turn out to be the way we want. This blog is more to channel my passion into something which can help microcap investors based upon which they can take their own judgment. Its a purely educational website and beside that I am NOT ALLOWED to give paid research as you have to be a SEBI registered analyst and I feel my objective here is educational rather than making money.

I would encourage all of you in fact to read my analysis and post me questions which we both can discuss.

Many thanks
Microcap

Stock Analysis: Vedanta Ltd

Hi All - My today's analysis is rather on a large-cap company instead of a small cap. Its none other than Vedanta.

Vedanta
- Market Cap 80K Cr
- Current price - 214.3
- 52 Wk H/L : 355/197


About the company- Owned majorly by Vedanta Resources, a metal, mining, power, and oil-and-gas company- Vedanta Resources holds 50.1% stake in Vedanta- The group's copper, iron ore, aluminium assets at Jharsuguda and Lanjigarh in Odisha and power divisions (2400-MW and 1215-MW captive power plants for the aluminium business), are in Vedanta. The group also has aluminium operations through Balco.- The copper business comprises mining and smelting operations in Zambia.

Key Financial Indicators: ParticulaRs. Unit 2018 2017 Revenue Rs. Cr. 92,975  73,091 Profit After Tax Rs. Cr. 13,692 11,316 PAT Margins % 14.7 15.5 Adjusted Debt/Adjusted Net worth Times 1.3 1.7 Interest coverage Times 5.7 4.4

Key features which actually makes this company extremely attractive at this share price

(i) Promoter holding is > 50% ... its 50.14% as per the latest shareholding statement
(ii) Current price of 214 is almost a 40 % correction to its 52 week high of 355 . The company fundamentals have only improved post its acquisition of Electro steel (90% stake ) while continuous growth in the profitability. It's just a matter of time before it goes back to its previous levels.
(iii) The complete portion of the company holding is unpledged.
(iv) Price to earning is just 6.55 which is almost 1/2 of its closest peer of Hind Zinc of 13 which again is pretty cheap on how the company has been performing.
(v) The company has a dividend yield of ~10% which is extremely good in current market conditions.
(VI) The company has good consistent profit growth of >25% over last 5yrs and its expected to keep growing at CARG of 25% for next 2-3yrs at least more.

With all the above features and good growth aspects in mind - do you think the above price justify an investment in this company? i think the answer is Yes.

Note: I am not a SEBI registered research analyst. I have an investment in this company around the current market price so my views might be biased.