Scripscan:Shasun Chemicals & Drugs Ltd
cmp:12
Traded in:Nse-bse
Story:Generic drugs and CRAMs producer Shasun Chem has been reduced to junk valuations. At the CMP of Rs 12,the entire company sells for Rs 60 crore. A valuation that reflects a virtually closed entity.The fact however remains that the corporate is running 5 units, with three spread over Coimbatore and Puduchery and two units in Britain.The Rs 400 crore entity has been impacted by a number of factors which include forex fluctuations and increase in price of chemical inputs imported from China. So much so that forex losses in FH2009 were Rs 20 crore and this was also the loss for the first half.However, the very factors impacting negatively in the first half are now improving,with the Rupee falling against the dollar and Chinese exporters cutting price of chemical inputs.The corporate has strengthened its contracts with Merck, Eli Lilly, Alpharma all innovator drug companies of the US. The Revenues from CRAMs will thus contribute substantially in the second half.The company is expected to witness significant improvement in growth outlook across segments.The companys Generic exports should drive near term growth aided by significantly enhanced exclusivity period profits in US markets (~$1.5bn exclusivity profits over next 3-4 years).It would be prudent to note that shasun"s CRAMS segment is set to gain traction with increasing emphasis on outsourcing to low cost Asian destinations by global pharma companies despite near term challenges.That should propel the company in the top league and give a booster to its growth.The revival in domestic business growth would support growth in generics and CRAMS for the company going forward.Weakening of rupee further reinforces earnings momentum in this export heavy sector.Strong growth, insularity to global slowdown, attractive valuations are some other factors which entails tremendous confidence.The company is expected to post 21% CAGR in revenues and 25% CAGR in earnings over FY08-10E.The company is insulated to the global financial turmoil and thus minimal impact of the global slowdown on revenue growth and profitability infact slowdown might even spur greater use of low cost generics.It is well supported by strong balance sheets and high operating cash flows. Investors with a one year view are unlikely to go wrong in this stock and can expect to see a price of rs 20 within the same time frame.
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Wednesday, February 11, 2009
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