The biggest possible thesis here in short term is management’s statement that the q4fy23 result is not one off. Management hadn’t made any such comment earlier. As far as i have studied the management, they generally don’t make false promises. They’re extremely conservative. One time in q1fy22 management had commented that this quarter is one off (having lowest PAT of 9cr during those quarters)and it turned out to be true. In consequent quarter business delivered PAT of 20crs. So we can’t say all the CMS revenue will vanish in next few quarters. The possible indication can be found in the attached photo. This is from q4fy23 concall. The question was asked regarding the expected growth in revenue for next two to three years.
The management answered that “the pipeline of molecules is strong potential of these molecules is fairly high evident in performance of recent few quarters I think same thing is sustainable they are not one offs”. Read that again please “potential of this molecules is fairly high evident in performance of recent few and the same thing is sustainable they are not one off”. That is an indication of traction of one or two molecules in CMS driving sales consistently during last three quarters.Perhaps the business is changing due to these molecules and getting predictable.
And in long term company has strong pipeline of molecules. Do not forget that it only two to three successful molecules to transition into huge market cap company. As most of the commercial molecules are premature their sales is ought to be lumpy (even for successful molecules in initial stages). More and more commercial molecules increases probability that some of these molecules will turn out to be blockbuster. the conservation management has admitted earlier in conference call that some of these molecule can be blockbuster. And some of those molecules commercialization has happened and some are expected to be commercialised by next year. So business is expected to transition form lumpy to structural. So we should refrain from being stuck in past thinking that the business is going to stay lumpy for long. the business is going to change structurally incoming 2 to 3 years so we better be aligned with that. And i have not mentioned the generic peptide molecules here. They are sooner or later going to file dmf filings and market this products. opportunity in this area is also humongous with competitive advantage. Very less business are available at thrown away valuation with almost certainty of success over the long term of 4 to 6 years with possible exceptional CAGR. that too with superior business economics and lots of optionalities. I think business will deliver in long term and the stock will have to follow. Imagine if had sold HDFC or Infosys just because it had doubled.
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