Shasun Pharma is a stock I had never heard of till I learnt that stock genius Prof. Shivanand Mankekar held a massive chunk of 21 lakh shares, comprising 3.71% of the total equity. At the CMP of Rs. 123, Prof. Mankekar’s holding in Shasun is worth Rs. 25.83 crore.
To understand the mysteries of Shasun Pharma, one has to turn to Daljeet Kohli’s masterful analysis of the stock.
In a report (pdf) issued in October 2012, Daljeet recommended a buy on the rationale that there were “Multiple triggers in pipeline”. He pointed out that Shasun has the world’s largest manufacturing capacity for Ibuprofen and that it is involved in CRAMS business for formulation & generic APIs. Shasun also, through its UK subsidiary, provides research & contract manufacturing solutions to emerging pharma companies. Shasun has multiple opportunities to monetize on, which would lead to healthy growth momentum, Daljeet added. The stock was at Rs. 169 then.
However, Daljeet got his analysis completely wrong. Shashun’s did not live up to expectations and its’ performance was highly erratic. After Daljeet’s recommendation, the stock plunged to a low of Rs. 45 in June 2013.
Prof. Shivanand Mankekar has been on a roller-coaster ride with Shasun. He bought a massive chunk of 3.63% of the equity in March 2012, when the stock was quoting at about Rs. 115 and watched it go to a high of Rs. 185 in September 2012 and a low of Rs. 45 in June 2013.
The reason for Shasun’s plunge on the bourses was its’ disappointing financial performance. In the June 2013 Quarter, it reported a consolidated loss of Rs 6.57 crore as compared to a profit of Rs 13.82 crore on a YOY basis. Likewise, in the September 2013 Quarter, the contract research and manufacturing segment (CRAMS) of Active Pharmaceutical Ingredients (API) shrank 53 per cent YOY, with sales of only Rs 5.8 crore as compared to Rs 12.46 crore in the corresponding quarter of last year. Shasun has also been plagued with labour trouble at its Puducherry plant.
Daljeet Kohli finally got so fed up with the stock that in February 2014 (pdf), he advised investors to sell the stock.
However, the indications now are that Shasun has got its act together. It reported good results in the December 2013 Quarter with the sales up 20% and the net profit up 58%. Also, Abhaya Kumar, its CEO and MD, went on record to say that the EBITDA will be around 13-14% and the revenue around Rs 400 crore in Q42014.
|Shasun Pharma’s Key Financials|
|(Rs cr)||Dec 2013||Dec 2012||YOY|
|Adjusted Net Profit||13.04||8.21||58.83|
Meanwhile, the immediate provocation for the sudden investor interest appears to be the rumor/ news that Shasun will benefit heavily as a result of the Sevelamer molecule drugs going off patent in the US. Savvy investors noted that Impax Laboratories Inc had begun shipping a version of the said drug and it was assumed that Shasun would also be the API supplier of that drug.
The other news that has excited investors is Shasun’s decision to make a preferential allotment of shares and warrants of Rs. 116 crore to SeQuent Scientific Ltd, a company with which it has a JV to manufacture veterinary products.
Meanwhile Prof. Shivanand Mankekar is sitting pretty in Shasun, watching his wealth compound at a furious pace. On the other hand, Daljeet Kohli must be ruing his decision to sell the stock in February 2014 when it was languishing at Rs. 79.