CAPLIN POINT LAB: A MULTIBAGGER STOCK (BUY/SELL/MULTIBAGGER/OUTPERFORMER/OUTLOOK _ Be and Make)

High risk taking Investors with medium to long-term perspective can buy this stock at current levels.
 

Company background:

Incorporated in Apr.'90, Caplin Point Laboratories was promoted by P C Partheeban, T Palanisamy, S Karunakaran, S Jayaraman and B A Ahmed. The company manufactures pharmaceutical formulations in the form of tablets, ointments and capsules, liquid orals and oral powders.

Proactive promoters can change the game!

The company management has been proactive enough to shift the business model at the right juncture. The company has shifted from conventional style of exports (diminishing margins) to sale points at strategic locations in central/south America & parts of Africa.

The company is constructing a new facility which would be in compliance with US FDA, UK MHRA and other regulatory bodies for multiple dosage forms such as liquid injectibles, ophthalmic drugs and lyophilized bio-tech products.

 

Facilities

Caplin Point currently has three fully functioning facilities and one more facility in the pipeline, capable of manufacturing a wide range of dosage forms and products catering to all segments of the pharmaceutical industry.

CP-I: Caplin Point Laboratories Ltd Unit-I (CP-I) is situated in Suthukeny, which is about 20 km from Puducherry with a green, pollution free environment.

CP-II: Caplin Point has set up a dedicated pharmaceutical R&D facility with capabilities to develop safe and effective formulations. Sophisticated facilities and resources are available to develop dosage forms like Tablets, Capsules, Semi-solids (including suppositories) and Liquid orals.

CP-III: Caplin Point Laboratories Ltd Unit-III (CP-III) is situated in the foothills town of Baddi in Himachal Pradesh with a panoramic view on Pinjore Nalagarh highway.

CP-IV: Caplin Point Laboratories Limited, Unit – IV (CP-IV) is under construction for manufacturing of Pharmaceutical formulations in Specialized Injectable dosage forms, Ophthalmic drops, Ointments and Suppositories. The facility is designed with a high level of sophistication and automated process control and will be in compliance with norms stated by US FDA, UK MHRA and other regulatory bodies belonging to PIC/s.

Strengths:

1. ·         Company is also having reasonable export growth for the last 7 years with consistency in advance payments towards exports.
2. ·         No major debts towards CAPEX.
3. ·         Currently doing the business of 150 crores without any working capital loan.
4. ·         Shortage of speciality injectables in the Regulated markets such as U.S and others is also a hidden opportunity in sight.
5. ·         70% of Pharmaceutical’s Regulated markets requirement are supplied from India and once we get into these markets Caplin will be one among the top 100 Pharma Companies. Expanding in LATAM to 7 more countries in addition to the 6 countries which we are at present.

To get the complete report in pdf: CAPLIN POINT

Concerns:

1. ·         Entry barrier to regulated markets are high.
2. ·         Risks of sustaining in these markets are a big challenge
3. ·         Other low-cost countries such as China and Israel affecting outsourcing demand for Indian pharmaceutical products

Be and Make’s View:

In my view, the pharma sector has huge potential and company is well poised to cater the huge opportunity in domestic and export market.  Promoters’ holding is also encouraging and there are no pledge shares.

After completion of CAPEX, caplin is able to generate an top line of Rs.400cr as per the guidance given by the management will give lot of confidence for the future. Considering the guidance given by the company based on the top line the NP of 10% (lower end of band) will give an EPS of Rs.30-38, PE of 10 would result stock price of Rs.300-400/- in the upcoming years. Considering the healthy balance sheet even at the current levels of Rs.107/- the stock is very undervalued and looks like best performer of 2014.

With thanks

Be and make

To get the complete report in pdf: CAPLIN POINT