Home
Saral Gyan Articles
Saral Gyan Services
Subscription
About Us
Contact Us
Dear Reader,
We are pleased to inform you that our Hidden Gem stock of November 2015 - Coral Laboratories Ltd (BSE Code: 524506) which was released on 06th Dec'15 is giving as on date returns of 105% to our Hidden Gems members. Our team suggested Buy on Coral Labs at price of Rs. 552.50 on 06 December 2015 with a target price of Rs. 1100. Stock has already achieved its target price recently and closed at Rs. 1134.20 today on BSE giving as on date returns of 105% to our Hidden Gems members in period of 1 year and 6 months.
In Dec'16 quarter, net profit of Coral Laboratories rose 62.38% to Rs 5.05 crore against Rs 3.11 crore during the previous quarter ended December 2015. Sales rose 25.28% to Rs 22.65 crore in the quarter ended December 2016 as against Rs 18.08 crore during the previous quarter ended December 2015
Below is the summary of Coral Laboratories Ltd shared by our team under Hidden Gem stock of Nov'15 released on 06th Dec 2015.
Note: This report is shared only for the purpose of information and not an investment advice. Kindly carry out your own due diligence in case of investment in Coral Laboratories.
1. Company Background:
The company’s product portfolio is composed of bacteria, biotic, inflammatory
and skin condition medicines, as well as protein supplements. It primarily
focuses on inflammatory, bacterial, biotic, protein deficiencies, and skin
conditions. The company principally offers Zest syrups/caps/drops, Moxbro
caps/tabs/dry syrups, and dedoxy/doxycycline capsules.
Company produces a variety of drugs like antibiotics, vitamin
supplements, protein supplements, iron supplements, antacids, antiulcer
medications, antispasmodics, analgesics, antipyretics, antiasthmatics,
anthelmentics, antidiabetics, antiamoebic, cough suppressants, expectorant,
anticold, cardiac medicines, special cardiac products, herbal medicines,
antibacterials, anti-eczematic and anti-fungal, and appetizers.
The company also offers oral antiseptic, antimalarial drugs,
muscle relaxants, nasal sprays, eye drops, ear drops, eye/ear drops, anti-allergic,
calcium preparations, mouthwashes, anti-emetic, antipsychotic drugs, and
injectables. The company offers its products in various dosage forms, such as
tablets, drops, capsules, dry syrups, liquid orals, inhalers, sprays, and
injectables.
The company exports its products to countries like Sri Lanka,
Myanmar, Cambodia, Vietnam, Jordan, the Philippines, Afghanistan, Kenya,
Nigeria, Malawi, Chile, Cuba, Barbados, Jamaica, Ivory Coast, Costa Rica,
Lesotho, Papua New Guinea, Malawi, and Hong Kong.
Coral
Labs has a wide range of drugs to offer from various segments, company offers
almost 450 SKUs as Non-Sterile products, 150 as Sterile products and 55 as OTC
& Nutraceutical products.
2. Recent Developments: (as on 06th Dec'15)
i) Increasing
Focus on Exports to drive Revenue growth and Profitability
Coral Labs is making continuous efforts to enhance its exports in
order to drive revenue growth and profitability. The Company’s export has
increased to Rs.31.59 crores in FY15 from previous year of Rs. 25.59 crores registering
growth of 23%. In FY15, company’s exports contributed 50.9% of total revenue
compared to 49.2% in FY14. With management focus on driving exports in semi
regulated markets, we expect revenue from exports will increase significantly
during next 2 to 3 years.
According to India Ratings, a Fitch company, the
Indian pharmaceutical industry is estimated to grow at 20 per cent compound
annual growth rate (CAGR) over the next five years. Presently the market size
of the pharmaceutical industry in India stands at US$ 20 billion. Branded generics dominate the
pharmaceuticals market, constituting nearly 70 to 80 percent of the market.
India is the largest provider of generic drugs globally with the Indian
generics accounting for 20 per cent of global exports in terms of volume.
The domestic generic drug market is expected to cross $27.9
billion from the current level of $13.1 billion registering compound annual
growth rate (CAGR) of about 16.3 per cent particularly due to approval accorded by USFDA makers and
21 drugs patent losing patent by 2019, according to a joint study by the
Associated Chambers of Commerce and Industry of India (Assocham) and RNCOS. The
major export markets for the country’s pharmaceutical products are Americas,
Europe, China, Japan, Africa, and others. The U.S. is single largest export
destination. It accounts for nearly 28 per cent of Indian pharmaceutical
exports, followed by the European Union (18 per cent) and Africa (17 per cent).
The pharma exports to the U.S. market are high due to the large number of
approvals from the USFDA.
According to a study on ‘Generic Medicines in India - Promulgating
Growth & Access , Generics would account for 85 per cent share in the
domestic pharma market by 2020, fuelled by cheap labour,
patent cliff of blockbuster drugs and prevalence of lifestyle diseases. Generic
drugs account for 75 per cent of the domestic pharmaceutical market by value.
Drugs for cholesterol control, pain management, anti-coagulant, respiratory,
liver disorders, depression and lipid regulators are highly prevalent in the
global market.
ii) Increase in Share Holding by Promoters
At the end of Sep’ 15, promoter shareholding stands at 71.57%. FII
and DII investment is nil in the company.
3. Financial Performance:
Coral
Laboratories standalone net profit rises 14.06% in the September 2015 quarter
Net profit of
Coral Laboratories rose 14.06% to Rs 2.84 crore in the quarter ended September
2015 as against Rs 2.49 crore during the previous quarter ended September 2014.
Sales rose 24.28% to Rs 18.07 crore in the quarter ended September 2015 as
against Rs 14.54 crore during the previous quarter ended September 2014
Coral
Laboratories standalone net profit rises 84.67% in the June 2015 quarter
4. Peer Group Comparison: (as on 06 Dec'15)
5. Key Concerns & Risks:
i) Coral Lab is present in the generics segment of pharmaceutical markets in different countries. Presence of many players in the industry and offerings of cheap generic products from unorganized sector is always a risk for the company.
ii) Coral Lab exports its Generic drugs to various countries like Sri Lanka, Myanmar, Cambodia, Vietnam, Jordan, the Philippines, Afghanistan, Kenya, Nigeria, Malawi, Chile, Cuba, Barbados, Jamaica, Ivory Coast, Costa Rica, Lesotho, Papua New Guinea, Malawi, and Hong Kong , the governments of different countries apply periodic price cuts on the pharmaceutical products so as to keep the healthcare cost under control which can impact the margins of the company.
iii) Stringent regulations and quality standards are prescribed by the regulatory authorities across the globe for the pharmaceutical products and their manufacturing and supply chain processes in order to protect the interests of the patients. Any deviation from the prescribed regulations or any variation in the quality from the prescribed standards may lead to punitive actions by the regulatory authorities.
6. Saral Gyan Recommendation:
i) Coral Labs is having more than 2 decades of experience and offers whole array of products which are decent on margins. As company exports to semi / less regulated markets and do not supply to the US, company does not have risk associated with USFDA stringent norms and regulations. Company has shown consistency in revenue growth with strong margins in recent years. With increased focus of management on exports in semi regulated markets, we expect net sales and PAT of the company to grow at CAGR of 20% and 26% respectively during next 2 years.
ii) The governments of various countries have been taking several cost effective measures in order to bring down healthcare expenses. Thus, governments are focusing on speedy introduction of generic drugs into the market. This too will benefit Indian pharma companies. Coral Labs is among the many companies with a large scale manufacturing portfolio and expertise to offer generic drugs in different therapeutic segments.
iii) Company has 3 state of the art plants with CGMP & FDA approvals. Company has demonstrated healthy domestic growth as well in the past. In India, company is doing well in the western and southern part. Company has complete portfolio of injectable, syrups, cough syrups and tablets in antibacterial, antibiotics segment and sells its products over the counter and on prescriptions. Company manufacture around 400 generic medicines on a significant scale in about 15 dosage forms.
i) Coral Labs is having more than 2 decades of experience and offers whole array of products which are decent on margins. As company exports to semi / less regulated markets and do not supply to the US, company does not have risk associated with USFDA stringent norms and regulations. Company has shown consistency in revenue growth with strong margins in recent years. With increased focus of management on exports in semi regulated markets, we expect net sales and PAT of the company to grow at CAGR of 20% and 26% respectively during next 2 years.
ii) The governments of various countries have been taking several cost effective measures in order to bring down healthcare expenses. Thus, governments are focusing on speedy introduction of generic drugs into the market. This too will benefit Indian pharma companies. Coral Labs is among the many companies with a large scale manufacturing portfolio and expertise to offer generic drugs in different therapeutic segments.
iii) Company has 3 state of the art plants with CGMP & FDA approvals. Company has demonstrated healthy domestic growth as well in the past. In India, company is doing well in the western and southern part. Company has complete portfolio of injectable, syrups, cough syrups and tablets in antibacterial, antibiotics segment and sells its products over the counter and on prescriptions. Company manufacture around 400 generic medicines on a significant scale in about 15 dosage forms.
vi) Management has rewarded shareholders by paying consistent dividend since last 13 years. For last financial year, company has paid dividend of Rs. 2.50 per share and dividend yield at current market price is 0.45%. With expected increase in revenue and profitability in coming years, we believe company dividend payout will increase going forward.
viii) On equity of Rs. 3.57 crore, the estimated annualized EPS for FY 16-17 works out to Rs. 47.6 and the Book Value per share is Rs. 181.2. At current market price of Rs. 552.50, stock price to book value is 3.05.
Considering
company’s steady growth with strong margins in past, increased thrust of management
on exports in semi-regulated markets and strong earning visibility with robust
business prospects, Saral Gyan team recommends “Buy” on Coral Laboratories Ltd at current market price of Rs. 552.50 for target of Rs.
1100 over a period of 12 to 24 months.
Buying
Strategy:
- 70%
at current market price of 552.50
- 30%
at price range of 450 - 470 (in case of correction in stock price in near
term)
To Read / Download Saral Gyan Hidden Gem - Nov'15 Research Report - Click Here
If you have patience and want to add extra power in your portfolio, start investing some portion of your savings in fundamentally strong small and mid cap companies - Hidden Gems & Value Picks.
The stocks we reveal through Hidden Gems & Value Picks are companies that either under-researched or not covered by other stock brokers and research firms. We keep on updating our members on our past recommendation suggesting them whether to hold / buy or sell stocks on the basis of company's performance and future outlook.
An opportunity missed is an opportunity lost, subscribe to Hidden Gems & Value Picks and start investing systematically in fundamentally strong small and mid cap companies. Avail attractive discounts by subscribing to our combo packs, click here for details.
Wish you happy & safe Investing.
Regards,
Team - Saral Gyan
An opportunity missed is an opportunity lost, subscribe to Hidden Gems & Value Picks and start investing systematically in fundamentally strong small and mid cap companies. Avail attractive discounts by subscribing to our combo packs, click here for details.
Wish you happy & safe Investing.
Regards,
Team - Saral Gyan
