Your SlideShare is downloading. ×
Venus remedies report_update
Upcoming SlideShare
Loading in...5
×

Thanks for flagging this SlideShare!

Oops! An error has occurred.

×
Saving this for later? Get the SlideShare app to save on your phone or tablet. Read anywhere, anytime – even offline.
Text the download link to your phone
Standard text messaging rates apply

Venus remedies report_update

182
views

Published on


0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total Views
182
On Slideshare
0
From Embeds
0
Number of Embeds
0
Actions
Shares
0
Downloads
7
Comments
0
Likes
0
Embeds 0
No embeds

Report content
Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
No notes for slide

Transcript

  • 1. C O M P A N Y U P D A T E India 14 Sep 2012 Venus Remedies Rs 287 Sector: Pharma Positive research resultsBSE Code 526953 NSE Code VENUSREM Venus Remedies has shown good progress from itsCMP (Sep 13) 287.5 52W H/L 308/141 research development pipeline in recent months,Nifty 4,842 Sensex 18021Equity Cap (m) 2,369 Face Value 10 with two of its innovative products getting patentShares (m) 9.74 Free Float 65.29% approvals by the US patent office. This marks a bigMarket Cap (m) 2,816 3M Avg Vol 83524 stride in Venus’ ability show results from its R&D investments, and the market has reacted positively, Shareholding Pattern Jun-2012 rerating the stock upwards. We believe these valuations are sustainable, with more upside possible on further research gains valuations. Promoters 32% 35% 2 major US Patents approved FIIs/FVCI Domestic The company achieved positive vindication of its research Institutions efforts, with approval of US patents for two key products: Corporate Bodies Potentox, suitable for Nosocomial Pneumonia and Febrile 19% 14% Neutopenia infections treatment; and CSE1034, an antibiotic product effective against a range of drug resistant 0% infections. New research product launched 330 Price Performance Venus launched a new research based product, 300 nanotechnology based „Taxedol‟, a single vial Docetaxel 270 240 product. With market size of Rs 15bn in the domestic 210 market, this is a key product addition to its strong kitty of 180 cancer products. 150 120 Top-line growth as per expectations 90 60 Venus has showed growth in revenue of 13.3% in Q1 FY13 30 (Apr-Jun‟12) in line with our expectations. The Company‟s - revenue reached Rs 1120mn in Q1‟FY13 from Rs 988.7 Jan-12 Feb- Mar- Apr- May- Jun- Aug- Sep- same quarter last year. Its EBITDA grew by 5.7% to Rs 12 12 12 12 12 12 12 281.2mn this quarter from Rs. 297.2mn in Q1‟FY12. It Venus Remedis Sensex registered PAT of Rs. 136.2mn up by 3.1% compared to Q1‟FY12. EBITDA and net margin are affected with increased SG&A expenses and higher depreciation and financial charges.Consolidated Financials Valuations FY11 FY12E FY13E FY14E Venus scrip has shown strong movement as its US patentsSales 3,631 4,196 4,788 5,546 for research products came through. The share hasEBITDA 892 1,022 1,186 1,395 increased more 70% since we came up with our lastPAT 462 493 610 755 research report in Jun 2012.EBITDA margin(%) 24.57 24.35 24.78 25.14Net margin(%) 11.74 12.75 13.62 Venus Remedies is currently trading at 5.4x ttm eps and 12.73 4.8x ttm ebitda which is still well below most of its peers.ROE(%) 22.65 18.07 18.01 18.56 The low valuations, and strong research pipeline, implyROCE(%) 19.11 16.28 16.37 17.39 current valuations are sustainable, with scope for furtherP/E Ratio(x) 3.9 5.7 4.6 3.7 re-rating on positive research developments.EV/EBITDA(x) 4.1 4.8 4.2 3.5EPS (Rs) 50.63 50.56 62.65 77.55 Rs mn Four-s reports are available on BLOOMBERG, Reuters, Thomson Publishers and Market Publishers
  • 2. Company Report: Venus Remedies 10 Sep 2012 Steady growth in Q1 FY13, to continue through FY13Particulars (Rs mn) Q1 FY13 Q1 FY12 Q4 FY12 % Chg YoY % Chg QoQNet sales 1120 989 1135 13.3 (1.3)Total Operating Income 1126 990 1147 13.7 (1.8)Total Expenditure 829 709 864 16.9 (4.1)Consumption of Raw 652 622 647 4.8 0.9Materials(Inc)/Dec in Stock In -30 -78 0 (62.0) -Trade & WIPEmployees Cost 57 55 56 4.6 2.3Other Expenditure 149 110 162 34.9 (8.0)EBITDA 297 281 283 5.7 5.1Depreciation 78 61 61 27.9 26.7EBIT 220 221 221 (0.5) (0.8)Interest & Finance charges 76 61 73 24.9 4.9Other Income 1 0 2 207.3 (37.3)PBT 145 160 151 (9.6) (4.1)Tax Expense 4 24 -5 (82.4) (186.2)PAT 141 136 156 3.1 (9.7) *Standalone (Source: Ace Equity, company reports) Stable growth in Q1 FY13FY13 growth Venus Remedies reported revenue of Rs 1120mn in Q1 FY13, uplikely to remain from Rs 989mn in same quarter last year, a good 13.3% growth overin line with Q1 the last year. Strong domestic market performance has contributedFY13 growth to this growth. Domestic market grew from Rs 376mn in Q1 last year to Rs 442mn in this quarter, a growth of 17.5% Y-o-Y. This gives assurance that efforts taken by the company to boosts revenue in the domestic market are on track. The company believes that it will continue to drive the growth on similar lines of 13-15% through-out the rest of the year with similar performance expected from domestic & international market in the near future. Margins on the expected levels The company has maintained margins in this quarter, EBITDA margin at 26.4%, and 12.5% PAT margin. These margins are at par with its historical figures and are on the expected lines. It clocked EBITDA of Rs 297mn this quarter up from Rs 281mn in the same quarter last year and PAT of Rs 140mn, up from Rs 136mn in Q1 FY12. Company‟s efforts to improve reach in domestic and internationalFour-S Research 2
  • 3. Company Report: Venus Remedies 10 Sep 2012 market has pushed the sales and distribution cost which has marginally affected the EBITDA margins for this quarter. The continued expenditure on R&D and other expenses has in effect pushed up the financing cost and depreciation. This has resulted in marginal dip in PAT margins. Key Ratios Q1 FY13 Q1 FY12 Q4 FY12 EBITDA Margin 26.40% 28.40% 24.65% Net Margin 12.48% 13.75% 13.57% Total Expenditure/Operating 73.60% 71.60% 75.35% Income Raw Material Cost/Operating 55.31% 54.94% 56.38% Income Staff Cost/Operating Income 5.07% 5.51% 4.86% Other Expenditure/Operating 13.22% 11.14% 14.11% Income *Standalone (Source: Ace Equity, company reports) Margins compare favourably with peersMaintains Venus Remedies‟ operating margins continue to be at the higher endstrong margins of its peer set. Most midcap pharma companies, including injectable companies, have operating margins in the range of 15-25%. Venus‟s reported EBITDA margin of 27% is better than most of this lot. It must be noted that Venus books more R&D expense through its balance sheet compared to its peers. With recent patents and upcoming research product launches, Venus could see further improvement in the EBITDA margins. We expect this change to manifest from middle of FY14. Better profitability supporting the growth Q1’FY13 Net Total EBITDA Net Income Company Income EBITDA Margin Income Margin Mid-Cap Peers Ajanta Pharma 1718 371 22% 196 11% Indoco Remed 1512 256 17% 104 7% Natco Pharma 1345 290 22% 168 12% Nectar Life 3936 604 15% 160 4% Parabolic Drugs 3052 433 14% 98 3% Injectable Peers Strides Arcolab 5083 1313 26% 905 18% Ahlcon Parenterals 248 49 20% 23 9% Parenteral Drug 716 -130 -18% -302 -42% Claris Life 1949 777 40% 323 17%Four-S Research 3
  • 4. Company Report: Venus Remedies 10 Sep 2012 Kilitch drugs 154 -1 -1% 29 19% Average 1932 390 16% 169 6% Venus 1120 297 27% 140 13% (Source: Ace Equity, company reports) R&D investments show greater results Receives 2 US patents for its research products2 significant US The innovation cell of Venus Remedies has given some significantpatent awards results this quarter. The Company received two patents from US patent office for antibiotic products: Elores and Potentox. Both products are from its anti microbial resistance (AMR) product line. The US patents are significant achievement for Venus Remedies as earlier the Company had patents mainly in EU and other regions like Australia, South Africa and the developing world while missing out on the major US market. These patents may further strengthen the market‟s belief in Company‟s R&D capability and its ability to achieve growth through its R&D products. ‘Super Bug’ resistant drug patented in USCSE1034, to be Venus Remedies has received patent from the US Patent Office for alaunched as breakthrough antibiotic product CSE1034. The new drug productElores in the CSE1034, is an antibiotic adjuvant entity (AAE), has been found to beIndian market, effective against a wide range of drug resistant infections includingis the most the `superbugs‟ like Carbapenemase resistant Metallo Betaeffective anti- Lactamses (MBL) strains. Venus is planning to launch this drug inbiotic India under the brand name ELORES and is planning to have a preformulation IND meeting with US FDA for fast track approval of this product.today The drug has been found safe while effectively dealing with hospital acquired (nosocomial) infections involving Metallo Beta Lactamase and other resistant strains such as E. coli, K. pneumoniae, P. aeruginosa & A. baumanni, with reduced drug induced toxicity resulting in lesser adverse effects. US patent for Potentox Venus Remedies has received patent from the US Patent Office for Potentox, the patent protects the composition of Potentox and the method of treatment. The Patent provides an exclusivity period for Potentox until May, 2027. In addition to this new patent grant, Potentox is protected by a number of other patents from across the Globe including India, Australia, New Zealand, South Korea, South Africa and Ukraine. The Company has already been marketing Potentox successfully in India and few of the emerging markets around the globe. TheFour-S Research 4
  • 5. Company Report: Venus Remedies 10 Sep 2012 product is growing with a CAGR of 50% since past 3 years and now Venus is planning to have a pre IND meeting with US FDA for fast track approval of this product. Designed novel, patented technology for anti cancer productsDPPC is a The Company has established pre-clinical proof of concept for itspatented drug Drug–Protein-Polymer-Conjugate (DPPC). The DPPC concept bydelivery Venus is a novel, patent protected technology, which will help inplatform alleviating cancer by specific and selective targeting of tumor cells. This is a platform technology with a novel concept of triple conjugate i.e., Drug -Protein-Polymer- Conjugate (DPPC). New Product launched: TaxedolTaxedol is a Venus Remedies Limited has introduced for the first time a nanoready to use technology based “Ready-to-Use” single vial Docetaxel in thesingle vial domestic market under the brand name “TAXEDOL”. This one-vialcancer product formulation has the advantage of requiring a single dilution step in suitable infusion solutions prior to administration. The product caters to the Rs 15bn Indian Cancer Drug Industry, which is expected to grow at close to 20% over the coming few years. Valuation: Available at decent bargain even after the upsurge EV/ EV/ Company Sales Price Mcap EV EBITDA Sales P/E Mid-Cap Peers Ajanta Pharma* 6435 411 9629 11228 8.4 1.7 13.2 Indoco Rem* 5851 69 6322 7191 8.6 1.2 14.1 Natco Pharma 5369 348 10849 11918 9.8 2.2 17.6 Nectar Life 14874 20 4496 4496 1.7 0.3 5.3 Parabolic Drugs* 10377 24 1507 6285 3.8 0.6 3.3 Injectable Peers Strides Arco 24916 886 52026 57982 68.0 2.3 6.1 Ahlcon Parenterals* 825 340 2448 2616 18.3 3.2 45.8 Parenteral Drugs 3333 70 1806 5502 -79.5 1.7 -2.3 Claris LIfe 7657 219 13986 14817 6.9 1.9 11.4 Kilitch Drugs* 914 80 1057 947 14.5 1.0 35.7 Venus Remedies 4181 286 2785 4579 4.8 1.1 5.4 *Standalone (Source: Ace Equity, company reports)Stock has seen Venus has seen a partial re-rating since we made our initiatialrerating, but research report. The share price has moved from 161 on 4 th June tostill cheap around 280-290 now. The driver behind the rerating has been the award of new patents for the US markets, which has bolstered investor confidence in the Company‟s research capabilities.Four-S Research 5
  • 6. Company Report: Venus Remedies 10 Sep 2012 Venus is currently trading at PE ratio of 5.4x which is still at 68% discount of its peers average. With current US patents approvals, regular product launch schedule and stable financial performance, we believe current valuations are sustainable, with upside based on further positive show from its R&D efforts. We raise our target price expectations to Rs 350 by Sep‟13, implying an upside potential upside of 22%. At this price the company quotes at 4.5x FY14 expected eps and 4x FY14 expected EV/EBITDA.Share Price and tt 400 350 7x 300 250 5x 200 150 3x 100 50 0 May-… Aug-… May-… Aug-… May-… Aug-… Nov-… Dec-… Mar-… Nov-… Dec-… Mar-… Nov-… Dec-… Mar-… Apr-09 Sep-09 Feb-10 Sep-10 Feb-11 Sep-11 Apr-12 Sep-12 Jun-09 Jun-10 Jun-11 Jun-12 Jul-12 Jan-12Four-S Research 6
  • 7. Company Report: Venus Remedies 10 Sep 2012 Financial AnnexureProfit & Loss StatementIncome Statement FY08 FY09 FY10 FY11 FY12E FY13E FY14EGross Sales 2,165 2,692 3,144 3,637 4,196 4,795 5,554Less : Excise Duty 9 4 4 6 0 7 8Revenue from Operations 2,156 2,688 3,140 3,631 4,196 4,788 5,546Decrease/(Increase) in Stock -48 -82 -62 -39 -90 -66 -77Raw Materials Consumed 1336 1668 1885 2054 2398 2666 3055Manufacturing/Other expenses 73 107 147 171 199 228 264Payments to and provision foremployees 119 141 167 200 253 301 362Power & Fuel Cost 19 20 17 27 34 38 44Selling and Distribution Expenses 62 98 153 198 231 264 305Administrative & Other expenses 57 87 91 119 150 171 198Miscellaneous Expenses 25 23 14 9 0 0 0Total Expenses 1,643 2,063 2,413 2,739 3,174 3,602 4,152EBITDA 512 625 728 892 1,022 1,186 1,395Depreciation 50 68 125 181 249 275 307EBIT 462 558 603 711 773 912 1,087Other Income 19 3 2 4 11 13 15Financial Expenses 48 84 141 189 256 256 256Profit before tax andExceptional Items 433 477 464 526 528 668 846Exceptional Items - - - - - - -Profit before tax 433 477 464 526 528 668 846Tax 75 37 68 64 36 58 90Profit after tax before minorityinterest 358 440 396 462 493 610 755Reported net profit 358 440 396 462 493 610 755 (Rs mn), consolidated financialsFour-S Research 7
  • 8. Company Report: Venus Remedies 10 Sep 2012 Balance SheetBalance Sheet FY08 FY09 FY10 FY11 FY12E FY13E FY14EShareholders EquityShare Capital 85 85 85 133 188 188 188Reserves and Surplus 784 1,259 1,627 2,236 2,896 3,506 4,261ESOPs - - - - - - -Total equity capital 890 1,386 1,712 2,369 3,083 3,693 4,449LiabilitiesSecured Loans 475 698 917 1,648 1,966 1,966 1,966Unsecured Loans 482 618 577 221 215 215 215Deferred Tax Liability 42 60 76 92 94 96 96Total Liabilities and OwnersEquity 1,889 2,762 3,281 4,330 5,358 5,971 6,726AssetsGoodwill on consolidation - - - - - - -Gross Block 1,526 2,096 2,609 3,429 4,332 4,930 5,653 Less: Depreciation 138 192 314 496 745 1019 1326Net Fixed Assets 1388 1905 2295 2933 3588 3911 4327Work-in-progress 14 8 7 145 200 225 325Investments - - - - - - -Inventory 278 446 619 754 960 1066 1200Debtors 169 330 283 357 430 535 619Cash and Bank Balance 11 16 24 31 42 67 95Other Current Assets 0 0 0 0 0 0 0Loans and Advances 183 239 260 378 464 583 700Total Current Assets 1,518 1,519 1,520 1,521 1,522 1,523 1,524Current Liabilities 86 113 98 116 190 250 330Provision 106 92 121 162 145 175 220Total Current Liabilities 192 205 220 278 335 425 550Net Current Assets 449 825 967 1242 1561 1825 2064Total Assets 1889 2762 3281 4330 5358 5971 6726 (Rs mn), consolidated financials Four-S Research 8
  • 9. Company Report: Venus Remedies 10 Sep 2012 Cash Flow StatementCash Flow Statement FY08 FY09 FY10 FY11 FY12E FY13E FY14ENet Profit/(Loss) before Tax 433 477 464 526 528 668 846Depreciation 50 52 125 182 249 275 307Deferred Employee Compensations 4 2 2 0 0 0 0Expenses Amortised 15 14 13 9 0 0 0Adjustment of excess mat Transferred to genreserve 0 0 -15 53 52 53 50Adjustment for FBT -2 -3 25 4 0 0 0Operating Cash flow before Wcap 500 541 613 774 830 996 1203Adjustments for increase /decrease in CurrentAssets -275 -275 -148 -327 -365 -329 -336Decrease / Increase in Current Liabilities/Provisions -33 -72 -123 -73 57 90 125Extraordinary Items -2 -4 0 0 0 0 0Cash Generated from Operations 190 189 342 373 522 756 992Direct Taxes Paid 0 0 0 0 -86 -109 -140Operating Cash flow- A 190 189 342 373 436 647 852Purchase/Sale of Fixed Assets (net) -743 -570 -512 -820 -904 -598 -724Decrease in Capital Work-in-Progress (includingcapital advances) 403 6 0 -144 -55 -25 -100Interest received 1 0 0 0 0 0 0Cash from Investing activities- B -338 -564 -512 -964 -959 -623 -824Proceeds from Issue of Share Capital 0 0 0 48 54 0 0proceed from share capital(share premium) -26 198 0 175 166 0 0Proceeds from Long Term Borrowing( Net) 133 160 25 731 318 0 0Proceeds from Short term Borrowing( Net) 22 20 153 -357 -6 0 0Cash from Financing activities- C 129 379 178 598 533 0 0Change in Cash= A+B+C -19 5 8 7 11 25 28Opening Balance 30 11 13 24 31 42 67Closing Balance 11 16 21 31 42 67 95 (Rs mn), consolidated financials Four-S Research 9
  • 10. Company Report: Venus Remedies 10 Sep 2012 RatiosRatios FY08 FY09 FY10 FY11 FY12E FY13E FY14EEPS 42.4 52.0 46.7 50.6 50.6 62.6 77.5CEPS 22.5 22.4 40.4 40.9 44.8 66.5 87.4DPS 2.0 2.5 1.0 1.3 1.4 1.7 2.1Valuation RatiosP/E Ratio 9.1 2.9 5.5 4.0 5.7 4.6 3.7EV/EBITDA 8.2 4.1 5.0 4.1 4.8 4.2 3.5EV/Sales 2.0 1.0 1.2 1.0 1.2 1.0 0.9ProfitabilityEBITDA margin 23.8% 23.3% 23.2% 24.6% 24.4% 24.8% 25.1%Pretax margin 20.1% 17.7% 14.8% 14.5% 12.6% 14.0% 15.3%Net margin 16.6% 16.4% 12.6% 12.7% 11.7% 12.7% 13.6%Return on avg. Equity 21.7% 38.6% 25.5% 22.7% 18.1% 18.0% 18.6%Return on avg. Capital employed 18.1% 24.5% 20.4% 19.1% 16.3% 16.4% 17.4%Growth RatiosRevenue growth 53.7% 24.7% 16.8% 15.6% 15.6% 14.1% 15.8%EBITDA growth 69.3% 22.0% 16.3% 22.6% 14.5% 16.1% 17.6%Net profit growth 52.5% 10.0% -2.7% 16.8% 6.6% 23.9% 23.8%Activity/Turnover RatiosAsset turnover 0.9 1.3 1.1 1.0 0.9 0.9 0.9Working Cap turnover 6.2 4.2 3.5 3.3 3.0 2.8 2.9Debtors turnover 16.3 10.8 10.3 11.3 11.3 9.9 9.6Debtor Days 22.4 33.8 35.6 32.2 32.2 36.8 38.0Inventory turnover 9.4 7.4 5.9 5.3 4.9 4.7 4.9Inventory Days 38.8 49.2 61.9 69.0 74.6 77.2 74.6Payables turnover 32.2 27.0 29.7 33.8 27.4 21.8 19.1Payables Days 11.3 13.5 12.3 10.8 13.3 16.8 19.1Liquidity RatiosCurrent Ratio 1.4 1.7 1.5 1.7 1.6 1.8 1.8Cash Ratio 0.2 0.1 0.1 0.1 0.1 0.1 0.2SolvencyDebt Equity 1.1 0.9 0.9 0.8 0.7 0.6 0.5Leverage Ratio 2.1 2.0 1.9 1.8 1.7 1.6 1.5Net Debt / EBITDA 1.8 2.1 2.0 2.1 2.1 1.8 1.5Interest Coverage 9.7 6.6 4.3 3.8 3.0 3.6 4.2 Four-S Research 10
  • 11. Company Report: Venus Remedies 10 Sep 2012About Four-S ServicesFounded in 2002, Four-S Services is a financial boutique providing Research, Financial Consulting and InvestmentBanking services. We have executed more than 100+ mandates across diverse range of industries for Indian aswell as global companies, investment firms and private equity and venture capital firms.Our clients value our focused, actionable advice which is based on deep domain expertise in Education, FinancialServices, Media & Entertainment, Healthcare, Consumer Goods, Automotive, Energy, Logistics andManufacturing. For further information on the company please visit www.four-s.comDisclaimerThe information contained herein has been obtained from sources believed to be reliable but is not necessarilycomplete and its accuracy cannot be guaranteed. No representation, warranty, guarantee or undertaking, expressor implied, is made as to the fairness, accuracy or completeness of any information, projections or opinionscontained in this document. Four-S Services Pvt. Ltd. will not accept any liability whatsoever, with respect to theuse of this document or its contents. This Company commissioned document has been distributed for informationpurposes only and does not constitute or form part of any offer or solicitation of any offer to buy or sell anysecurities. This document shall not form the basis of and should not be relied upon in connection with any contractor commitment whatsoever. This document is not to be reported or copied or made available to others.Four-S may from time to time solicit from, or perform consulting or other services for any company mentioned inthis document.For further details/clarifications please contact:Alok Somwanshi Ajay JindalAlok.somwanshi@four-s.com Ajay.jindal@four-s.comTel: +91-22-42153659 Tel: +91-22-42153659Four-S Research 11

×