Sharon Bio-medicine will count as one of Daljeet Kohli’s biggest flop stock picks. The stock did live up to its initial promise and delivered magnificent gains. However, thereafter, something, somewhere seems to have gone wrong and the stock has registered colossal losses. I have conducted a forensic analysis of the stock in my piece What We Can Learn From The Sharon Bio-Medicine Fiasco.
Anyway, Sharon Bio-Medicine has reported dismal Q3FY15 results which has resulted in Daljeet Kohli taking a long and hard look at the stock. After deep thought, Daljeet has decided to cut his losses and has terminated coverage of the stock. This is what he says in his latest advisory:
“Termination of coverage: Sharon Bio-medicine (SBML IN) grossly underperformed in terms of sales, EBITDA as well as adjusted PAT. This is mainly due to y-y contraction in sales coupled with sharp increase in material cost. As a result, SBML reported loss of Rs758mn at EBITDA level compared to operating profit of Rs372mn for Q2FY14. Weak operating performance along with higher interest cost resulted in loss of Rs921mn against profit of Rs171mn at net income level. As of now, there is no visibility on USFDA inspection at its manufacturing facility, which was one of the key trigger for business growth. Though the key trigger was taking time to pan out, operating profit of base business was sufficient to compensate interest outgo. However, Q3FY15 result indicates pain in base business as well. Hence, we terminate our coverage on the lack of any major driver for growth in business of SBML and low visibility on sustainability of operating profit of base business going forward.”