Neuland Labs is a Hyderabad based pharma co. with presence in:
Anti-Asthmatic
Anti-Infective
Cardiovascular
Central Nervous System
- Anti-Depressants
- Anti-Parkinsons
- Anti-Alzheimer's
Anti-Ulcerants
Anti-Fungals
Fluoroquinolones
Anti-Diabetic

Their product is listed here:
http://www.neulandlabs.com/api/our_products.html.

They have got into peptides and have a tie-up with Genzyme Corp,Switzerland for this. From what the CEO indicated in the AGM, the other players like Divis Labs, Jupiter Biosciences also do peptide building blocks. Sale of USP and EP grade generic peptide APIs to domestic and international customers will start in 2nd half of FY12.

The June quarter is typically weak but in Q1FY12 they have posted a profit. Last year they had done an EPS of 9 but that included loss in Q1.

There current order book is at Rs. 300 cr. which is to be executed this year as indicated in the AGM. The sale in the 1st qtr was 102.31 cr.

They have JV with Cato Research Israel for clinical trials for diabetes, dermatology, oncology and other therapeutic segments. They have got all approvals for this and can start operations now. Neuland owns 70% stake in this.

The last 3 years capex has been Rs. 146.4 cr. which has gone into R&D and improving facilities. This should start reaping benefits now.

Mcap: 50 cr.
MCap/Sales: .125
P/E 9.7
BV 133.98
EV/EBITDA 5.43
Promoter shareholding 36.17%
Pledging 21.78% - This is for loans taken from SBI and EXIM banks.

FY06    FY07    FY08    FY09    FY10    FY11

Sales:
170.29    213.25    224.89    312.03     281.25     393.69

NP
6.24    9.04    11.35    11.92     (6.90)    5.29

EPS
11.56    16.75    21.04    21.21     (14.99)    9.78

Debt
41.17    77.98    134.09    200.32     233.18     233.74

D/E
0.81    1.34    2    2.69     3.05     3.33


Negatives:
Debt level is high and the AR 2011 indicates default also. The audit report indicates that the audit was not complete. The detailed reasons were not indicated in the AGM. The debt in FY11 at 233.74 cr. has remained at similar levels to FY10 at 233.18 cr.

The EBIDTA margins have been poor compared to other peers. The management has indicated that there focus is on getting profits up and with the capex incurred in last few years this should look up. Their new products are with an eye to margins.

The promoter holding is ~36% which implies that funding needs is difficult with stake level. A dilution or increased debt can happen. Currently they have indicated to raise 12 cr. through rights issue.

Dividend has not been paid for last 2 yrs.


Positive:
Their sales has increased in FY11 considerably and the stock is cheap on Mcap/Sales at about .125.

There are drugs going off-patent like Zyprexa, Singular/AR, Lexapro which are supposed to go off patent by Mar-12 and hence can benefit Neuland who has capability to manufacture.

Foray into peptides can benefit them as there are very limited players in India. Most of the competition is from Switzerland.

The board consists of Humayun Dhanrajgir who is also a director in Zydus Welness and Cadilla. He was the MD of Glaxo earlier and well regarded in pharma industry. The others on board are also distinguished.

Amitabh Bachan is invested in this one, don't know if this is a positive or negative:).(Incidentally he also has picked up stake in Birla medspa recently)

This can be probably a contra bet with this looking a turnaround case.

Edited by srisaurabh2000 - 16/Aug/2011 at 2:06am