Monday, November 29, 2010

Albert David-'Placentrex' cloud in a silver lining

Management : G.D.Kothari group
Year of operation : 72nd year
Base city : Kolkatta
Business segment : Pharmaceutical ( Formulations, Bulk Drugs, Disposable syringes & needles)
Manufacturing locations:
Kolkatta:  unit spread over 38 acres for Formulations & Bulk Drugs
Ghaziabad:unit spread over 55 acres for Infusion Solutions & Oral solids
Mandideep ( near Indore):unit spread over 12 acres for  Disposable syringes & needles
Ajinomoto Inc, Japan ( worlds largest manufacturer of Amino Acids)
Rousell Morishita Co, Japan for manufacturing and marketing a wide range of Crystalline Amino Acid Infusion Solutions, Oral solids and liquids in India.
Sales & Marketing set up:
Field force : 400 + pan India
Sales depots: 15 pan India
Stockists : 1500 pan India
Retail outlets ( chemists/drug stores) covered: 1,25,000 pan India
Financial Highlights ( in INR)
Balance sheet:
Equity Capital: 5.71 cr
Loan funds: 53.27 cr ( as of Sept 30,2010)
P&L (2009-10)
Net sales +other income : 204.50 cr
EBIDTA : 28.60 cr
Gross profit: 24.76 cr
Profit before tax: 15.72 cr
Profit after tax : 10.27 cr
EPS : 18
6-months ended Sept 30,2010:
Net sales +other income : 122.60 cr ( 10% growth over same period last year)
EBIDTA : 15.24 cr (8.5% growth over same period last year)
Profit before tax: 13.60 cr
Profit after tax : 9.14 cr ( 20% growth over same period last year)
Past performance :
1)   Albert David’s CAGR for the last 6 years considering 2003-04 as a base is 15.2%. If we consider a 6% price increase every year, the CAGR would fall below the double digit mark.
2)  In terms of field force productivity, number of representatives below break even point was as high as 63% , which leaves only about 37% of the total field force being profitable
3) Poor sales force performance has been one of the key reasons for muted growth in revenue and profitability
Key brands in 2009-10:
Placentrex cream  achieved a 95.3% growth
Verbet achieved a 58.8% growth
Siotone achived a 43.1% growth
Going ahead:
1)   Key emphasis has been laid on 100% achievement of target at each product level,each Territory level,Area, region and zone level.
2)   Concentration on driving growth in Group A + and Group A products ( which registered 135.71 cr turnover and 17.4% growth in 2009-10)
3)   New product launches (Calcium preparations,Laxative combinations,Uterione tonic, Anitbiotic Cefixime range)
Key concerns:
Albert David is the pioneer in Human Placental Extract Therapy and their Plcaentrex gel, injection,lotion form a key part of its portfolio.  This drug is banned in the US due to possible viruses which may pose a safety hazard. Around a year back,the DGCI had asked the Drug Technical Advisory board to examine whether the drug does indeed have harmful side effects and if it should be banned.It is not clear what effect an adverse ruling in this matter can have on the company's revenue and profitability.
The above concern has been one of the key reasons for the retreat in the Albert David share price depsite robust Q2 results. 
The company is currently available at a market price of Rs.140 and an EV of about 133 cr .It is currently in a high- risk investment zone due to the uncertainity of impact on the financials that a negative ruling can bring.
 At the time of writing this report, the author /his family have an investment interest in the stock mentioned above. Under no circumstance does the information in this report represent a recommendation to buy or sell the above-mentioned stock.  This report has been prepared and issued on the basis of publicly available information, internally developed data & other sources believed to be reliable. This is just a suggestion solely for information purposes and does not constitute a solicitation to any person to buy or sell a security. While the information contained therein has been obtained from sources believed to be reliable, no responsibility (or liability) is accepted for the accuracy of its contents. Readers using the information contained herein are solely responsible for their actions and are advised to satisfy themselves before making any investments.

1 comment:

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