Caplin Point listed on Forbes Asia’s “200 Best Under a Billion” for 2024

Caplin Point Laboratories Ltd has been recognized yet again in Forbes Asia’s 200 Best Under a Billion list for the year 2024, a compilation that underscores companies’ sustained and robust performance across critical benchmarks. Carefully selected from a substantial pool of more than 20,000 publicly
traded companies across the Asia-Pacific region, 200 enterprises with annual sales under $1 billion are chosen based on qualitative and quantitative metrics. The comprehensive criteria encompasses evaluation of debt management, sales growth, earnings-per-share performance, as well as returns on equity.

Commenting on the achievement, Mr. C.C. Paarthipan, Chairman said:
“Caplin Point Laboratories Ltd’s inclusion in Forbes Asia’s ‘200 Best Under a Billion’ list for the seventh time underscores our relentless pursuit of excellence and financial discipline. This recognition, a rare achievement for an Indian pharmaceutical company, reflects our ongoing efforts to strengthening cash
flows and ensuring consistent profitability. We are committed to upholding the highest standards in every aspect of our business, ensuring sustained growth and value creation for our stakeholders.”

About Caplin Point Laboratories Limited:
Caplin Point Laboratories Limited is a fast-growing pharmaceutical company with a unique business model catering predominantly to emerging markets of Latin America and Africa. Caplin Point is one of the few companies to show consistent high-quality growth in Revenues, Profits and Cash flow over
the last 15 years. The Company has state of the art manufacturing facilities that cater to a complete range of finished dosage forms. The Company has also entered regulated markets such as US through its Subsidiary Caplin Steriles Limited.

Caplin Point listed on Forbes “Asia’s 200 Best Under a Billion” list for 2024. Company has
appeared for the seventh time on this list (2014, 2015, 2016, 2021, 2022, 2023 and 2024) and was awarded “The Emerging Company of 2018” by Economic Times Family Business Awards

Your take on profitability? And
How do you see Amazon in the refurbished category? Can it be a threat?

My two cents on Rain Industries:

Positives and Key Considerations for Rain Industries:

1. Raw Material Availability: Rain Carbon recently received approval for a higher allocation of Graphitized Petroleum Coke (GPC), a critical raw material for their Vizag and SEZ plants. This development comes after a long period of restriction and should enable the SEZ plant to operate at full capacity within 6 to 12 months. This increased capacity could significantly boost revenue and profitability, thanks to enhanced operating leverage.
2. Debt Management: Although Rain Carbon’s debt is high and interest rates are elevated, the company historically took on loans at low interest rates for expansion projects. Their Return on Equity (ROE) was previously higher than the interest rates on the debt, making this a reasonable strategy. With most of the capital expenditure completed and plants coming online soon, the company is positioned to start reducing debt more aggressively as no major capex has been planned in near term. Also interest savings flow through to the bottom line, this could lead to a re-rating of the company’s stock. This can change the perception of investors looking towards this business.
3. Aluminum Market Outlook: The demand for aluminum is expected to rise due to trends such as the shift toward electric vehicles, automotive and aerospace light-weighting, and the expansion of renewable energy infrastructure. Global aluminum production is projected to grow, surpassing previous highs over the next few years.
4. Cost Efficiency: Rain Carbon is among the world’s lowest-cost producers of GPC and CPC Though they don’t beat their chest and say, their cost advantage is reflected in their operating margins, even during downturns, positioning them favorably compared to competitors.

Optionality and Strategic Moves:

1. Anhydrous Carbon Pellets (ACP): Since 2011, Rain Carbon has been developing ACP to mitigate risks associated with the availability and quality of GPC. This patented product could provide a significant competitive moat by safeguarding margins against raw material price fluctuations.
2. Shift to Value-Added Products: The company is transitioning towards value-added products in advanced carbon materials, which should stabilize margins and reduce cyclicality compared to their traditional products.
3. Focus on Energy Storage Materials: Rain Carbon is making strides in the energy storage sector with the establishment of a new R&D facility in Hamilton, Ontario. This center will support the development of energy storage materials for lithium-ion batteries, solid-state batteries, sodium-ion batteries, and hydrogen fuel cells. The R&D efforts are expected to drive innovation and strengthen their position in the energy storage market.

Given Rain Carbon’s strong cash flow, low valuations, potential for debt repayment, Operating Leverage, recovering carbon product demand, and other strategic initiatives (Optionality Playing out), it appears that many of the negative factors have been addressed. Any positive developments could lead to a significant re-rating of the company’s stock, which is currently undervalued and overlooked.

DISC: Invested (Can be Biased)

My higher allocation bets ( > 3 pc ) include –

Neuland Labs
Eris Lifesciences
RPG Lifesciences
Mankind Pharma
Zydus Lifesciences
Windlas Bio
Innova Captab
Wockhardt

Senco Gold

HDFC AMC
Nippon Life AMC
Karur Vysya Bank
Federal Bank

Dodla Dairy

Garware Hi Tech Films
Shaily Engineering Plastics
Time Technoplast
Usha Martin

I would be a buyer in all the above mentioned stocks at prices 5-7 pc below CMP ( except for Neuland Labs maybe ). If u want to ask me about any particular stock / stocks among these, I ll be happy to reply

I hold about 25 more stocks. But allocation in those would be around 1 pc each