Getting external funding for the API business , valuing the API business at 225 crore . The capacity of th capsule business has gone up from 14 BCPA to 18 BCPA. they should start seeing volume and slight margin expansion in the coming quarters. This capacity will go up to 22 BCPA by the end of Q4 FY23. If the Q2 net profit was 5.3 cr, I believe conservatively at the end of Q4 results the net profits will be around 6 cr . This will lead to an yearly profit of 24 cr at least for FY24. So the stock is trading below 15 PE for conservative FY 24 profit.
At full capacity with slight margin expansion quarterly profits will sky rocket to 8.5 cr , yearly profit for 36 cr, which would mean the business is trading at less than 10 PE.
I do believe margins will expand as these new capsule lines are said to produce higher margin capsules, but also the fact that slowly the power, packaging and logistics cost will be coming down, there should be some margin expansion as well.
Add to it the fact their API business got external funding , valuing just their API business at 225 cr (https://www.bseindia.com/xml-data/corpfiling/AttachLive/99c656a8-49a9-4121-bcb3-825f6931c902.pdf) . The stock seems extremely undervalued .
Let me know if I am missing something .
Disclaimer :- Invested from lower levels. Thinking of adding more.
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