One notable aspect of the Motilal Oswal 19th Wealth Creation Study is that of the seven stocks short-listed as potential 100-baggers, four are Pharma stocks. This is not surprising when you bear in mind Atul Suri’s point that Pharma stocks are on an upward trend for the past several years and that this will continue in the future as well. Also, the Pharma sector has shown the least volatility and this makes it the ideal choice for investment.
Of the four Pharma stocks in the list, two of them, namely, Suven Life Sciences & Shilpa Medicare, are well known to us for having delivered multi-bagger returns already.
While Vineeta Mahnot of Hem Securities discovered Suven Life Sciences, credit for identifying the potential of Shilpa Medicare goes to Daljeet Kohli.
Vineeta Mahnot first put a buy on Suven Life Sciences in October 2013 when the stock was available at a throwaway valuation of Rs. 46. She pointed out that Suven has grown from a pure contract research player to a collaborative research partner. It integrates all the processes from drug discovery and development services to clinical supplies, manufacturing and packaging. The company has a patent profile of 18 inventions, 569 products patents and 36 process patents. She further pointed out that Suven has a growing product pipeline, efficient business model, CRAMS business growing sharply, strong research and development ability and healthy relationships with huge global Pharma companies. She also explained that Suven Life Sciences Ltd has a healthy and visible revenue stream and that it would do well.
Well, Vineeta was absolutely correct in her analysis because at today’s CMP of Rs. 222, investors are sitting on mind-boggling gains of 380% in about 14 months.
Shilpa Medicare came into the limelight when Daljeet Kolhi recommended a “Strong Buy” on the basis that there are “Multiple triggers ahead… US story yet to start”.
Daljeet has explained the entire nuts & bolts of Shilpa Medicare’s working and why it would give explosive returns in future.
Daljeet also gave an interview a few days ago when he said that FY 17 or FY 18 would be “blockbuster years” for Shilpa Medicare. He said:
“Shilpa Medicare is involved in high level of R&D on many oncology products. We like the Company’s capability to identify the products and build the capacities around that. It is already a very strong and established player for certain oncology related APIs. The company is now in process of building base for a very strong growth in FY17-18 when patents of many of the molecules that it is working on will get over. FY14 was exceptionally good year in terms of financials for the company thus optically growth in FY15 may look muted because of high base effect.
We expect FY16 to be normal year and then FY17 or FY18 to be another block buster year for the company. Near term trigger for the stock would be long pending inspection of one of its facility by the USFDA.”
FirstCall Research has also recently issued a research report on Shilpa Medicare in which the facts relating to the Company and the Industry are explained in detail. FirstCall has recommended a buy on the basis that there is and will be a great demand for oncology products in the Country.
Both stocks fit in with the five criteria specified in the Motilal Oswal 19th Wealth Creation Study. They are small (market cap ranging from Rs. 2100 Cr to Rs. 2800 Cr), appear to have huge potential ahead, are manned by managements of proven capability and are not terribly expensive (P/E is less than 25).
So, now the onus is on us to do in-depth research into these stocks and then take an informed decision on whether we should buy them or not.