PLETHICO PHARMACEUTICALS 

 CMP 387   FV 1   MARKET CAP 1315 CR

IT IS MAINLY INTO HERBAL PRODUCTS AND NUTRACEUTICALS(food supplements etc)

ESTABLISHED IN 1991, PLETHICO CHANGED ITS FOCUS TO HERBAL PRODUCTS AFTER A FEW YEARS AND RECENTLY TOOK OVER A US BASED BRANDED NUTRITIONAL PLAYER –NATROL TO STRENGTHEN ITS PLACE IN THE LIFESTYLE PRODUCTS CATEGORY OF NUTRITIONAL PRODUCTS.

PLETHICO ALSO BENEFITS BY INTRODUCING NATROL’S PRODUCTS IN NON US MARKETS. IT ALSO GETS TO CROSS SELL ITS OWN PRODUCTS THROUGH NATROL’S DISTRIBUTION CHANNEL IN US.

RESTRUCTURING OF MANUFACTURING OPERATIONS:

PLETHICO HAS UNDERTAKEN CAPEX OF AROUND 200 CRORES TO SET UP MANUFACTURING BASE NEAR DUBAI, UAE AND HAS A TAX HOLIDAY OF 50 YRS.  THIS WILL SAVE THE CYCLE TIME AND BENEFITS WILL BE VISIBLE FROM FY 12 ONWARDS.

PRODUCTS:

HERBAL PRODUCTS INCLUDE TRAVISIL RANGE OF COUGH DROPS, MOUNTAIN HERBZ, NUTRITIONAL PRODUCTS LIKE COACH’S FORMULA ETC

INDIAN MARKETS NOW OFFER STRONG GROWTH POTENTIAL FOR ITS NUTRITIONAL SUPPLEMENT SEGMENT FROM NATROL STABLE.

FINANCIALS

Projections for dec10 to dec12 from crisil report(which I feel are conservative)

FOR Q1 ENDED MARCH 10, SALES WAS 335 CRORES, NP 58 CR (before extraordinary items) EPS FOR Q1 IS 17 (not annualised)

DEBT EXPECTED AROUND 560 CRORES FOR FY 10 WHICH IS EXPECTED TO REDUCE GOING FORWARD.

PUBLIC SHAREHOLDING IS ONLY 13%. PROMOTERS HOLD 87% STAKE BUT AS AT MARCH 2010, 90% OF THIS WAS PLEDGED. BUT AS PER BSE ANNOUNCEMENT, IN MAY PLEDGING HAS COME DOWN TO AROUND 80% DUE TO REVOKING OF PLEDGE.

POSITIVES:

GOOD GROWTH PROPSECTS FOR THE COMPANY DUE TO NATROL ACQUISITION AND ITS SYNERGIES

MARGIN IMPROVEMENT EXPECTED POST 2011 DUE TO BENEFITS OF DUBAI MANUFACTURING BASE

CHEAP VALUATIONS OF AROUND 6 PE—CHANCES OF RERATING ARE THERE

NEGATIVES:

PROMOTER PLEDGING

OUTSTANDING FCCB FOR WHICH COMPANY HAS BEEN MAKING PROVISIONS.

TECHNICALS:

THE STOCK IS STUCK IN A VERY NARROW RANGE OF 330 TO 410 FROM DEC 09 ALMOST SINCE 7 -8 MONTHS.  NOT TOO MUCH BY WAY OF TECHNICALS.