Jenburkt Pharmaceuticals Ltd.
BSE Code -
524731
Current Market Price -
`
81.25
Market Capitalisation –
`
37.78 cr.
Fair Valuation -
`
158
Dividend Yield on FY11e Dividend –
6.15 %
Last 10 Years' Avg. Div.Payout Ratio w.r.t. N.Profit –
68.53 %
Industry –
Pharmaceuticals(Branded Formulations)
No. of Products -
81
(Domestic Market)No. of Products -
25
(International Market)
FY10 Sales –
`
51.41 cr.
FY10 Operating Profit -
`
6.24 cr.
FY10 Net Profit -
`
3.77 cr.
1
st
Half FY11 Sales -
`
28.38 cr.
1
st
Half FY11 Operating Profit -
`
5.48 cr.
1
st
Half FY11 Net Profit -
`
3.37 cr.
FY10 EPS -
`
8.1
1
st
Half FY11 EPS (Not Annualised) -
`
7.27
RoCE –
41.14
RoE –
35.97
Debt-to-Equity -
0.47
EV/EBITDA -
3.41
P/E Ratio (
x
Annualised FY11 EPS) -
5.57
Contents of the Report :-
Theme of the ReportInvestment RationaleBrief Industry OverviewBrief Company OverviewManagementManagement QualityManagement CapabilityProducts OverviewCurrent Product Portfolio & Distribution NetworkProduct StrategyProduct PipelineFinancialsPast Financial Track Record of Last 10 YearsKey Financial Ratios like RoCE, RoE & D/E for last 5 YearsLikely Future FinancialsCurrent ValuationValuation Commanded by Peers alongwith Comparision of Key FinancialParametersConclusionTabular Data depicting competitive Brands, Pricing, and Overview of most of theproducts of Jenburkt
High Margin ProductsUnique Combination – Niche ProductsOther Products
Theme of the Report :
Companies with historical high dividend payout ratio w.r.t. to net profit are interesting investment candidatesonce their business cash generation begins an up-cycle, as investors invested in it at the start of the up-cycle not onlyget steady returns on their investment but multiply their capital manifold within a short period of time. JenburktPharmaceuticals Ltd. is one such company which is like an undiscovered gem in the recession-proof industry viz.Pharmaceuticals. It has all the ingredients required to qualify for a low-risk-high-return investment with :
➢
a credible management at the top,
➢
great financial stability which is evident from highest rating of CRISIL at SE1A,
➢
a good growth track-record with last 10 years' CAGR in Topline at 23.4 % while that in EBITDA at a whooping69.4 %,
➢
a sound product strategy with clear focus on high margin products,
➢
opportunistic postioning in the business cycle with the start of expansion in margins,
➢
expanding export presence with a lot of scope to expand further as current no. of countries being exported toare only 13,
➢
improving utilisation in company's cGMP certified plant at Sihor, Gujarat
➢
a strong domestic distribution network of 26 Superstockists and Consignee Agents, about 1,000 Stockists,45,000 retailers and 480 medical representatives and front line managers,
➢
generous payout track-record with last 10 years' avg. payout at a whooping 68.5 % of net profit whereincompany has not skipped the dividend even when the profits were dismally low which indicatesmanagement's commitment and concern towards minority shareholders.All said in brief, lets now evaluate the company in slight detail :
Investment Rationale :
What we look for when we invest in a company ?-- There are six most important aspects to it which are like sixpillars on which any succesful investment decision hinges. They are Management Credibility, Product Strategy, PastFiancial Track Record & Likely Future Financials, Current Valuation and Peer Valuation. Starting below we havefocussed on each and every aspect in slight detail and so we have divided this report into following sections :Brief Industry OverviewBrief Company Overview(1)Management Credibility(a) Management Quality(b) Management Capability(2)Products Overview(a) Current Product Portfolio & Distribution Network
(b) Product Strategy(c) Product Pipeline(3)Financials(a) Past Fiancial Track Record of Last 10 Years(b) Key Financial Ratios like RoCE, RoE & D/E over last 5 Years(c) Likely Future Financials(4)Current Valuation(5)Valuation Commanded by Peers alongwith Comparision of Key Financial ParametersConclusionTabular Data depicting competitive Brands, Pricing, and Overview of most of the products of JenburktHigh Margin ProductsUnique Combination – Niche ProductsOther ProductsSo, lets start....
Brief Industry Overview :
The pharmaceutical formulations market includes the domestic and the export market. The domestic marketaccounts for approximately 61 per cent of total formulation sales. The share of exports has steadily risen from 30 percent in 2005‐06 to around 39 per cent (market size: $5.2 billion in 2009‐10) in 2009‐10.The domestic formulations market has expanded at a CAGR of 14‐15 per cent over the last three years andreached a size of Rs 417 billion in 2009‐10. This was primarily driven by robust growth witnessed in the anti‐diabetic,cardiovascular, gynecology, respiratory and Neuro/CNS segments. In 2009‐10, the lifestyle diseases segment grew bynearly 25 per cent as compared to the overall industry growth of 17.7 per cent. In the domestic market, lifestylesegments such as anti‐diabetic, cardiovascular and gastrointestinal have emerged as chief growth drivers over the last3‐4 years. Acute segments, mainly anti‐infectives, have continued to expand at a steady rate due to inadequatesanitary and hygiene conditions.The domestic market is concentrated at the top with the top ten players controlling about 38 per cent of thetotal formulations sales. Within exports, entry barriers are significantly higher in the regulated markets as compared tosemi‐regulated markets due to stringent regulatory norms in the regulated market.
Brief Company Overview :
Incorporated in 1985, Jenburkt Pharmaceuticals Ltd. Is promoted by Bhuta Family, a family of repute whoseforefathers had a large contribution in building Sihor town in Gujarat and even today, under family's umbrella, varioushospitals, colleges and schools are running in Sihor. Jenburkt is engaged in manufacturing of branded formulations,which is promoted ethically through its own field force. It has a state-of-the-art ISO 9000 & WHO-GMP Certifiedmanufacturing plant at Sihor-Gujarat,in India with a fully equipped, DSIR recognised in-house R&D Unit. It currentlyhas in its basket around 81 products & its variants for the domestic market while it exports around 25 products to 13countries.
(1)Management Credibility
Management credibility is one of the most important factor while deliberating on an invesment argument fora company. While evaluating management, we need to look deeply into the past to assess whether the managementwe are referring to is credible or not. We will do this in two ways as follows :
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