Shilpa Medicare

Fun_Da_Mentalist · Oct 21, 2015

Why is Shilpa Medicare spurting? Is there any event which I missed that might explain this?

Sachin pathak · Oct 21, 2015

Isnt it hightime the scrip shows some traction... After remaining largely rangebound between 900-975 past couple of quarters?

Fun_Da_Mentalist · Oct 21, 2015

True. But why now? Trigger or just fresh buying?

Meenakshi Razdan · Oct 21, 2015

Shilpa Medicare is a well researched stock. The trigger point is the much anticipated FDA approval to the Raichur facility. Some of this is already in the price. The plants have been inspected by the FDA and the approval should be round the corner. You can see the status of the approvals here.

Financially, the company is doing well with an (FY15) operating margin of about 24%, net margin of about 14%, ROCE of 21 and RONW of about 17. The debt equity ratio is also low at 0.17. The stock is not cheap at 44x. However, if the FDA approvals do come through, it will give rise to higher growth momentum.

Fun_Da_Mentalist · Oct 21, 2015

Yes. It does seem though that FDA Approvals, in general, are coming thru slower than in the past. Even if fresh regulation makes the FDA process more compact that new regime comes into play after current backlog is cleared. Bottom line - one can expect a shift in approval dates vis a vis expected dates.

Srouta Mukherjee · Oct 21, 2015

If you want good pharma stock at reasonable valuations you can consider JB Chem.

In the pharma midcap space, we aggressively buy JB Chemicals; it is available at 10 PE on one-year forward earnings basis. The company is sitting on cash pile. The company has around Rs 500 crore cash while debt is as low as Rs 100 crore. These are the two stocks we like in the pharma space.

https://articles.economictimes.india...s-research-advisory-pharma-space-jb-chemicals

Sachin pathak · Oct 21, 2015

So whats the plan for this 100cr cash pile with jb chemicals

Sachin pathak · Oct 21, 2015

Meenakshi Razdan said: ↑

Shilpa Medicare is a well researched stock. The trigger point is the much anticipated FDA approval to the Raichur facility. Some of this is already in the price. The plants have been inspected by the FDA and the approval should be round the corner. You can see the status of the approvals here.

Financially, the company is doing well with an (FY15) operating margin of about 24%, net margin of about 14%, ROCE of 21 and RONW of about 17. The debt equity ratio is also low at 0.17. The stock is not cheap at 44x. However, if the FDA approvals do come through, it will give rise to higher growth momentum.
Click to expand...

What is the expected impact of the JV with ICE/PCA? The existing CRAMS agreement generates 40% of revenues currently

If everything moves as per expected schedule, The full revenues benefits will come from 2017-18 only

Shilpa’s Jadcherla formulation facility was inspected by USFDA recently. FDA approvals for this plant by around mid 2016 after which it is expecting to get ANDA approvals one by one.

Few key risks

- delayed USFDA approvals
- resulting idle capacity due to JV's - ICE/PCA and for their ARV maufacturing
- Balancing formulation segment and API segment as Its vendors would be its competitors going forward

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