Hem Securities gave strong logic while recommending Suven Life Science in its latest research report.
Hem pointed out that Suven had posted excellent quarterly performance for the quarter ending June 2013. Its’ revenues from operations had jumped by around 54% at Rs.108.67 crores vs Rs.70.53 crores y-o-y. Operating profit climbed manifold at about Rs.43.03 crores as against Rs.13.34 crores in the previous year quarter. The net profit skyrocketed at Rs.29.77 crore for the quarter as compared to Rs.7.96 crore.
Hem Securities was also gung-ho about Suven’s valuations. It said that Suven’s revenue stream was sustainable with growing product pipeline, efficient business model, CRAMS business growing sharply, strong research and development ability and healthy relationships with huge global pharma companies.
However, even Hem Securities would have been surprised by Suven Life Sciences’ performance on the stock exchane.
When Suven announced its Q2FY 2014 results yesterday, the stock skyrocketed 16%. Suven reported an over seven-fold increase in standalone net profit for the second quarter ended September 30, 2013. Its net sales during Q2, 2013-14 were at Rs 151.41 crore as against Rs 50.25 crore in the year-ago period.
However, some analysts were jittery about Suven Life Sciences. S. P. Tulsian sounded a note of caution that as Suven Life Sciences had run up from Rs 22 to the current level of Rs 80, it was overvalued. He said assuming an EPS of Rs. 15-16 for FY14, the stock was now ruling at a PE multiple of close to 5 whci is quite high for a small cap API company.
Hem Securities would probably agree with S. P. Tulsian’s analysis because their own price target for Suven Life Sciences was only Rs. 60.
So, it makes immense sense to get out of Suven Life Sciences when the going is good.