Stock Synopsis: PLETHICO PHARMA

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PLETHICO PHARMA

Printed From: The Equity Desk
Category: Investment Ideas - Creating winning portfolios!
Forum Name: Stock Synopsis
Forum Discription: A bried discussion of companies on very specific matters. Normally this is the prelude for further research as always members would be discussing quality companies with good management only
URL: http://www.theequitydesk.com/forum/forum_posts.asp?TID=2907
Printed Date: 21/Apr/2025 at 4:22pm

Topic: PLETHICO PHARMA

Posted By: hit2710
Subject: PLETHICO PHARMA
Date Posted: 27/Jul/2010 at 8:09pm

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

YEAR	DEC 08	DEC 09	DEC 10E	DEC 11E	DEC 12E
SALES(CR)	904	1243	1691	1981	2225
NP	89	187	223	237	347
EPS	26	55	65	69	101
ROE	13.5	22.9	22	19.2	22.9
P/BV	3	2.1	1.6	1.2	0.9

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.

disc: holding the stock.

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Stockmarket is a weird place. For every person who buys a stock there is a person who sells it and both think they are very smart.

Replies:

Posted By: karn
Date Posted: 27/Jul/2010 at 9:02pm

Hitesh, what is FCCB in outstanding FCCB??

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“Invert, always invert.”

Posted By: mukulgarga
Date Posted: 27/Jul/2010 at 9:06pm

Dear Hitesh

Really Love you for your stock selection.

I have been holding the stock since 110/- and will hold for very long time.

It's my favorite stock and would be giving you more inputs on it.

And by the way its Face Value is Rs 10 and not Re1. I am famously known in my circles to be allergic to split values unless genuinely needed.

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I always knew I was going to be rich. I never doubted it for a minute.

Posted By: srisaurabh2000
Date Posted: 27/Jul/2010 at 10:31pm

Hitesh,

Have you looked at Venus Remedies - the numbers for them are also interesting?

Posted By: hit2710
Date Posted: 27/Jul/2010 at 11:38pm

Originally posted by mukulgarga

And by the way its Face Value is Rs 10 and not Re1. I am famously known in my circles to be allergic to split values unless genuinely needed.

Thanks for correcting the typo error. Would like your inputs on this one.

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Stockmarket is a weird place. For every person who buys a stock there is a person who sells it and both think they are very smart.

Posted By: hit2710
Date Posted: 27/Jul/2010 at 12:01pm

Originally posted by karn

Hitesh, what is FCCB in outstanding FCCB??

Foreign Currency Convertible Bonds. Each bond is having a certain face value denominated in foreign currency and is convertible into a fixed number of shares at a future date at a pre determined price. I cant find the details of how many FCCBs are outstanding and what the terms of conversion are. But since the stock is close to its high, I guess all fccbs will be converted which might lead to some equity dilution but then it will also reduce the cost of borrowing if used to pay up debt.

I also expect some method of dilution of promoter stake to comply with SEBI diktat to reduce stake by 5% each year and bring it down to 75% or less. Here, promoter
holding is around 87%.

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Stockmarket is a weird place. For every person who buys a stock there is a person who sells it and both think they are very smart.

Posted By: hit2710
Date Posted: 27/Jul/2010 at 12:03pm

FCCBs can lead to forex loss because they are denominated in some foreign currency(usually USD) and any big fluctuation in the currency rate may lead to notional forex loss.

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Stockmarket is a weird place. For every person who buys a stock there is a person who sells it and both think they are very smart.

Posted By: hit2710
Date Posted: 27/Jul/2010 at 12:07pm

Originally posted by srisaurabh2000

Hitesh,

Have you looked at Venus Remedies - the numbers for them are also interesting?

Dont know too much about venus remedies.

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Stockmarket is a weird place. For every person who buys a stock there is a person who sells it and both think they are very smart.

Posted By: Jaishrikrishna
Date Posted: 27/Jul/2010 at 12:16pm

HERE'S A RESEARCH REPORT ON THIS ONE ( http://www.moneycontrol.com/news/recommendations/buy-plethico-pharma-targetrs-454-firstcall-_467511.html - CLICK )

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Don't Buy and Hold, Buy and Homework / Fish see the bait,but not the hook; Men see the profit, but not the peril.

Posted By: vaib
Date Posted: 27/Jul/2010 at 2:59am

Slightly off topic but how about Surya Pharma. Very cheap good performance. I guess people don't like the promoters there.

Posted By: Jaishrikrishna
Date Posted: 27/Jul/2010 at 9:17am

Originally posted by vaib

Slightly off topic but how about Surya Pharma. Very cheap good performance. I guess people don't like the promoters there.

Their major income is derived from CRAMS, and the debt level is higher than the market cap.

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Don't Buy and Hold, Buy and Homework / Fish see the bait,but not the hook; Men see the profit, but not the peril.

Posted By: hit2710
Date Posted: 03/Aug/2010 at 10:11am

Plethico has come out with June qtr(second qtr) results.

Cons Sales 353 cr (march qtr was 335)
Cons Net profit (after extraordinary) 62 cr (march qtr 58)

(this company has extraordinary items--- profit or loss of around 12-15 crore every quarter so one needs to compare results after extraordinary items.)

For six months ended June 2010, sales 688 cr and net profit 133 cr, giving eps of 33 for half year.

Good set of numbers for the company. Profit margins are very good especially on NPM front.

Stock currently quoting around 400.

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Stockmarket is a weird place. For every person who buys a stock there is a person who sells it and both think they are very smart.

Posted By: excel_monkey
Date Posted: 28/Dec/2010 at 1:41am

hit2710 ji

In the right sector
At a P/E of 6
a blind buy?

is this company for real?
why are the mutual funds shunning this stock?
is there something seriously wrong with the promoters?

http://ibnlive.in.com/generalnewsfeed/news/it-dept-unearths-tax-evasion-by-plethico-pharma/320448.html

http://www.plethico.com/addons/Corporate_Presentation.pdf

Posted By: excel_monkey
Date Posted: 28/Dec/2010 at 3:26am

I suspect the FCCBs are owned by the promoters indirectly
why would they have to pledge 80% of their holdings?
what have they borrowed such large sum for?

Originally posted by hit2710

Originally posted by karn

Hitesh, what is FCCB in outstanding FCCB??

Posted By: hit2710
Date Posted: 29/Dec/2010 at 12:36pm

Originally posted by excel_monkey

In the right sector
At a P/E of 6
a blind buy?
is this company for real?
why are the mutual funds shunning this stock?
is there something seriously wrong with the promoters?

Few red flags
1. Very high promoter pledging inspite of high promoter holding
2. fccb overhand remains
3. debt seems high.

The sector in which the company operates is quite attractive == herbals and nutraceuticals with very few comparable companies. But the above factors turned me off.

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Stockmarket is a weird place. For every person who buys a stock there is a person who sells it and both think they are very smart.

Posted By: pkumar
Date Posted: 29/Dec/2010 at 12:59pm

What about Elder pharma. They have been almost leaders in nutraceuticals

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"The news is always a mix of positive and negative. When markets decline, people point to the negative news; and when it increases, the positive news is emphasized." - Bob Farrell

Posted By: excel_monkey
Date Posted: 29/Dec/2010 at 2:55pm

did you see this news
http://ibnlive.in.com/generalnewsfeed/news/it-dept-unearths-tax-evasion-by-plethico-pharma/320448.html

Originally posted by hit2710

Posted By: shontou
Date Posted: 19/Aug/2011 at 9:50pm

Conference Call
Plethico Pharmaceuticals
The Capex expected to be USD 8-10 million for CY'12

Plethico Pharmaceuticals announced the results for the quarter ended June 2011 and held conference call on 19th August 2011 to discuss the results and its future growth strategies. Key take aways of the call are as follows.

Financial Information:

Plethico Pharmaceuticals consolidated net sales were higher by 29% to Rs 454.31 crore for the quarter ended June 2011. However, OPM fell by 560 basis points to 19% resulting operating profit to witness marginal decline of 1% to Rs 86.40 crore. Other income fell by 55% to Rs 0.26 crore. With incline in interest cost by 5% to Rs 7.15 crore and fall in depreciation by 41% to Rs 2.82 crore, PBT inclined by marginal 1% to Rs 76.68 crore. Further, the decline in tax by 26% to Rs 1.54 crore has facilitated the net profit to grow by 2% to Rs 75.14 crore. After accounting Rs 0.79 crore as EO net off tax compared to Rs 11.59 crore in the corresponding previous period, net profit after EO was up by 19% to Rs 74.36 crore.

Highlights of the Call:
Revenues from the Neutraceuticals business grew by 37% to Rs 203.67 crore for the quarter ended June 2011, contributing 45% to the net sales. In addition, Herbal business grew by 29% to Rs 214.48 crore contributing 47% to the net sales.
Revenues from Allopathic business declined by 5% to Rs 34.33 crore for the quarter ended June 2011, contributing 8% of net sales. However, Revenues from the Contract Manufacturing fell by 24% to Rs 1.83 crore for the same period.
Revenues from the US witnessed robust growth 45% growth to Rs 125.98 crore for the quarter ended June 2011, contributing 28% to the net sales. In addition, Rest of the World (RoW) markets grew by 28% to Rs 264.73 crore for the quarter ended June 2011, contributing 58% to the net sales. Further, revenues from the India grew by 6% to Rs 63.6 crore contributing 14% to the net sales.
Revenues from the neutraceuticals had declined in the Q1 FY 2011, on the back of lower sales of essential pure ingredients in the US. However, Q1 FY 2012 quarter witnessed good growth and has a contribution of USD 5.2 million (against USD 6.5 million in H1 CY'11). Further, the Natrol business also witnessed good growth contributing 30% to the US Sales for the quarter ended June 2011.
The Company is working on the FCCB's front as they're approximately USD 100 million outflow that could potentially happen in October 2012. Further, It has sort out a strategy for the repayment and also reproached RBI for the restructuring of the bonds (as one of the options available).
The Capex expected to be USD 8-10 million for the CY'12, and the investments relates to new brands, brands registration, promotion and labeling. Further, the tax rate expected to be 8% for the CY12.
The Consolidated Debt is at Rs 742.26 crore as of June 30th 2011, compared to Rs 659.63 crore as of June 30th 2010. In addition, Cash and Bank balances at 60 crore as of June 30th 2011, compared to Rs 78.54 crore as of June 30th 2010. Further, the receivable days are at 189 days and it expects to bring down to 155-160 days by the year ended 2011.

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