Scripscan:BDH Industries Ltd
Target return percentage:85%+6.5%:91%
Special mention:1 re dividend,X date 20th august.
Business and product range:BDH Industries engages in the manufacture and sale of therapeutic formulations covering a range of pharmaceuticals worldwide.Its products include antifungal, antibiotics, anticancer, antidiabetics, antidepressant,antiulcerant,anti-emetics, corticosteroids, diuretics, vitamins and minerals etc and skin protective products in the form of tablets, capsules, injections, oral suspensions, creams, syrups, ointments, and topical powders.The company also provides specialty formulations in therapeutic applications comprising electrolyte replinishers, narcotic analgesic, and non-steroidal anti-inflamatory. In addition, it offers various bulk drugs, such as azithromycin dihydrate, erythromycin stearate, erythromycin estolate, erythromycin base, and erythromycin ethyl succinate. Further, the company manufactures SOULFIL,an oral pill for the treatment of erectile dysfunction in men.Thanks to a dedicated R&D team, BDH is poised to conquer new heights, having only recently joined the sparse ranks of companies manufacturing anti-cancer formulations in India.BDH's state-of-the-art manufacturing facility won GMP Certification from WHO way back in 1982. Today, it has accreditation for more than 170 products and represents a perfect balance between the five M's - Man, Machine, Materials, Methods and Measurements.
Exports and Accolades:BDH today exports a wide range of finished pharmaceutical formulations and bulk drugs to leading organizations in several countries including Australia, Bolivia, Denmark, Dominican Republic, Germany, Ghana, Japan, Kenya, Madagascar, Malaysia, Mozambique, Netherlands, Niger, Nigeria, Papua New Guinea, Yemen, Singapore, Sri Lanka, Sudan, West Indies, Zambia, Zimbabwe etc.The Government of the India has accorded "Star Export House" status to BDH and also accredited with WHO-GMP Certification since 1982 and ISO 9001:2008 by SGS (UK) Limited."Federation of Indian Export Organisations (FIEO) Export Award "NIRYAT SHREE" 2001-2002 & 2008-2009."Good Corporate Citizen” Award by Bombay Chamber of Commerce & Industry 2010"."State Pharmaceutical Corporation (SPC) Sri Lanka Merit Award 2010"“STAR Export House” status by Govt. of India."WHO-GMP Certificatation since 1982, renewed WHO-GMP in 2010"."WHO-GMP Certificatation for over 170 products"."ISO 9001:2008 Certification from SGS UK Chemexcil TOP Export Award"."Chemexcil Trishul Award for Consistent Export Performance"."Government of Maharashtra Export Award"."Ministry of Commerce's Award from the President of India".
Future Prospects:The implementation of modern technology in the production processes shall yield better results.Consistent efforts are made by the company to introduce technology upgradation and comply with guidelines relating to GoodManufacturing Practices.It has been registering products with various countries.Also there are visits by various MOH (Ministry of Health) of various Governments as well as customers.Pharma business has detailed procedure for registration and it takes nearly 6 months to 24 months for completing the registration and begining of business.The gestation period is high due to various stages of operation by every country in their own way.The medicines of the company are marketed at the lowest prices in the world at the same time high standard is maintained.Being in pharma sector,inspite of some limitations, decent future growth in business is expected in Domestic as well as Export markets.The company is also on a hiring spree suggesting higher demand for its products,one can find several of its jobs in the leading job portals.Penning an analysis on a 9crs company is incredibly tough where there's hardly any information to work upon.Hunch backed up by making out of hints in no time leads to success in stock picking.From hiring to awards all are a testimony to the fact that this penny stock posses the needed ingredients to be a bigger one in the coming period.
Realty story:BDH stands out for Bombay Drug House. Company's plant is located on 2.7 lac sq ft at Kandivali east adjoining to Big Bazaar in the prime location of Kandivali.The FSI there is 2 which give saleable area of 5.4 lac sq ft on which 30% loading is permissible and feasible. Thus total saleable area works out to 7 lac sq ft and the existing market rate is Rs 5000 per sq ft. BDH has a manufacturing are spread over 42,500 square feet though the entire space is 270,000 sq ft.Co owns land and development cost is estimated at Rs 2000 per sq ft which leaves post tax profit ( 30% assumed) of Rs 2100 per sq ft.The clear tax free profit could be Rs 147 Crore on equity of Rs 6 Crores offering earnings of Rs 240 per share.Shifting cost is not in excess of Rs 15 Crore which hardly matters.Rumuors are that one of the leading Mumbai Builders has approached the co with a outright sell of the said land for Rs 125 Crore which was refused by the co.Since the property is adjacent to Big Bazzar, chances of Pantaloon or RIL stepping in is not ruled out.So if it vindicates all these then BDH is all set to make history in the bourses.Again the same has been there for eternity now and yet nothing has happened.It may so happen that nothing happens in the next decade too.
Conclusion:Its a small cap pharma counter with just a marketcap of 9crs having an equity of around 6crs.The company has guided a CAGR topline as well as bottomline growth of 35-40% for the coming couple of years(Profits should grow higher than the guidance,say 45-50%,thanks to the USD rates).For fiscal 2012-13 it delivered revenues of 40crs with a profit after tax of 1.67crs.The company has been very consistent too with its number over the last five years.The recent June quarter result further entails more confidence.Net profit of BDH Industries rose 123.81% to Rs 0.47 crore in the quarter ended June 2013 as against Rs 0.21 crore during the previous quarter ended June 2012. Sales rose 32.73% to Rs 9.57 crore in the quarter ended June 2013 as against Rs 7.21 crore during the previous quarter ended June 2012.It has a great payout ratio and pays more than 30% of its profits through dividends.The company has declared a dividend of 1 re and its going XD on 20th of august.So whoever will purchase the shares till 20th of this month will avail the dividend yield of nearly 6.5%.On a valuation parameter it quotes at less than 3 times its expected fy15 earnings of 6rs.The promoters own 55% stake in the company.Considering its small scale, I put a modest multiple of 5 to arrive at a cool price target of 30 bucks.Any news on the realty part can take the stock price to levels which I cant fathom at this juncture.Downsides are very limited from the present prices.
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