Unexplored Small Cap Pharma Stock Coral Laboratories

UNEXPLORED MULTIBAGGER SMALL CAP STOCKS
EQUITY RESEARCH REPORT
CORAL LABORATORIES LTD. BSE CODE: 524506
Industry: Pharmaceuticals CMP: Rs. 552.50 (06/12/2015)
Market Cap: 197.24 (INR in Crore) Target Price: Rs. 1100
Date: Dec 06, 2015 Time Period: 12 – 24 months
Saral Gyan Capital Services
An Independent Equity Research Firm
www.saralgyan.in | www.saralgyan.com

HIDDEN GEMS – NOVEMBER 2015
- 2 - SARAL GYAN CAPITAL SERVICES
TABLE OF CONTENT
S.No Content Page No.
1. Company Background 03
2. Recent Developments 06
3. Financial Performance 08
4. Peer Group Comparison 10
5. Key Concerns / Risks 10
6. Saral Gyan Recommendation 11
7. Disclaimer 13

1. Company Background
Coral Laboratories Limited was
founded in 1994 and is engaged in
pharmaceutical business in India
and internationally.
Coral Laboratories Ltd (Coral Labs) is equipped with total three ultra-modern
strategically spread manufacturing units located in Daman, Dehradun and Vasai, which
are ideal for manufacture of around 400 generic medicines on a significant scale in
about 15 dosage forms. Coral Lab is among the many companies with a large scale
manufacturing portfolio and expertise. All 3 state of the art manufacturing plants are
with CGMP & FDA approvals.
The company’s product portfolio is composed of bacteria, biotic, inflammatory and skin
condition medicines, as well as protein supplements. It primarily focuses on
inflammatory, bacterial, biotic, protein deficiencies, and skin conditions. The company
principally offers Zest syrups/caps/drops, Moxbro caps/tabs/dry syrups, and
dedoxy/doxycycline capsules.
Company produces a variety of drugs like antibiotics, vitamin supplements, protein
supplements, iron supplements, antacids, antiulcer medications, antispasmodics,
analgesics, antipyretics, antiasthmatics, anthelmentics, antidiabetics, antiamoebic,
cough suppressants, expectorant, anticold, cardiac medicines, special cardiac products,
herbal medicines, antibacterials, anti-eczematic and anti-fungal, and appetizers.
The company also offers oral antiseptic, antimalarial drugs, muscle relaxants, nasal
sprays, eye drops, ear drops, eye/ear drops, anti-allergic, calcium preparations,
mouthwashes, anti-emetic, antipsychotic drugs, and injectables. The company offers its
products in various dosage forms, such as tablets, drops, capsules, dry syrups, liquid
orals, inhalers, sprays, and injectables.
The company exports its products to countries like Sri Lanka, Myanmar, Cambodia,
Vietnam, Jordan, the Philippines, Afghanistan, Kenya, Nigeria, Malawi, Chile, Cuba,
Barbados, Jamaica, Ivory Coast, Costa Rica, Lesotho, Papua New Guinea, Malawi, and
Hong Kong.
Mr. Navin B. Doshi has been overall responsible for the operations and smooth
functioning of business of the company successfully and has been instrumental in
achieving substantial growth for the company as Director. Mr. Navin B. Doshi, founder
of Coral Labs, has over three decades of marketing experience in the pharmaceuticals
industry.

Coral Labs has a wide range of drugs to offer from various segments, company offers
almost 450 SKUs as Non-Sterile products, 150 as Sterile products and 55 as OTC &
Nutraceutical products.
Products Range in Antibiotics / Antibacterial Segment
SR NO. PRODUCTS GENERIC NAME & STRENGTH UNIT PACK
1 CLODAX L 250 DT AMOXYCILLIN 125 MG + CLOXACILLIN 125 MG + LACTIC ACID BACILLUS 30 MLN SPR 10x10
2 CLODAX L 500 MG CAPSULES AMOXYCILLIN 250 MG + CLOXACILLIN 250 MG+ LACTIC ACID BACILLUS 60 MLN SPR 10x10
3 CLODAX CLOXACILLIN 250 MG TABLETS 1x1000
4 DECIP 250 MG TABLET VITAMINS WITH TIMED RELEASED IRON CAPSULES 10X10
5 DECIP 500 MG TABLET CIPROFLOXACIN TABLETS BP 500 MG 10X10l
6 CITI TABLETS CIPROFLOXACIN 500 MG + TINIDAZOLE 600MG 25x10
7 CITI H TABLETS CIPROFLOXACIN 250 MG + TINIDAZOLE 300MG 25x10
8 CITI SUSPENSION CIPROFLOXACIN 250 MG + TINIDAZOLE 300 MG 60 ML
9 CITI SUSPENSION CIPROFLOXACIN 125 MG + TINIDAZOLE 150 MG ORAL SUSPENSION 100 ML
10 CILCLOX 500 MG CAPSULES AMPICILLIN 250 MG + CLOXACILLIN 250 MG CAPSULES 10x10
11 CILCLOX 250 DT TABLETS AMPICILLIN 125 MG + CLOXACILLIN 125 MG TABLETS 10x10
12 DEROX KID TABLETS ROXYTHROMYCIN DISPERSIBLE TABLETS 50 MG 10x10
13 DEROX LIQUID ROXITHROMYCIN ORAL SUSPENSION 50MG / 5ML 30 ML
14 DEROX DROPS ROXYTHROMYCIN ORAL SUSPENSION 25MG/ML 10 ML
15 DEDOXYN CAPSULES DOXCYCLINE CAPSULES BP 100MG 30x10
16 DACLOR 250 MG CAPS CHLORAMPHENICOL CAPSULES BP 250 MG 25x10
17 DACLOR 500 MG CAPS CHLORAMPHENICOL CAPSULES BP 500 MG 25x10
18 DEROX 150MG TABLETS ROXYTHROMYCIN TABLETS 150MG 10x10
19 DAX-LA 125 MG DT TABLETS CEFADROXYL 125 MG + PROBENCIDE 125 MG 10x6
20 DAX-LA 250 MG TABLETS CEFADROXYL 250 MG + PROBENCIDE 250 MG 10x6
21 DAX-LA 500 MG TABLETS CEFADROXYL 500 MG + PROBENCIDE 500 MG 10x6
22 DAX-LA SYRUP CEFADROXYL 125 MG + PROBENCIDE 125 MG/5ML 30 ML
23 DAX REDIUSE CEFADROXIL ORAL SUSPENSION 125 MG / 5 ML 1 X 30 ML
24 DAX REDIUSE CEFADROXIL ORAL SUSPENSION 250 MG / 5 ML 1 X 30 ML
25 SPARCOR 200 Each film coated tablet contains SPARFLOXACIN 200 MG 6`s
26 MOXBRO 250 MG CAPSULES AMOXYCILLIN 250 MG + BROMHEXINE 8MG 25x10
27 MOXBRO 500 MG CAPSULES AMOXYCILLIN 500 MG + BROMHEXINE 16MG 25x10
28 MOXBRO KID TABLETS AMOXYCILLIN 125 MG + BROMHEXINE 4MG 10x12
29 MOXBRO 250 MG DT TABLETS AMOXYCILLIN 250 MG + BROMHEXINE 8MG 10x12
30 MOXBRO CAPSULES AMOXYCILLIN 250 MG + BROMHEXINE 8MG 25 X 10
31 MOXBRO DRY SYRUP AMOXYCILLIN 125 MG + BROMHEXINE 4MG DRY SYRUP 60 ML
32 AKTRIM 480 MG TRIMETHOPRIM 80MG + SULPHAMETHOXASOLE 400MG 10 x 10
33 TRIMETHOX 480 MG TABLETS TRIMETHOPRIM 80MG + SULPHAMETHOXASOLE 400MG 50 x 10 / 12 x 10
34 AKTRIM FORTE TRIMETHOPRIM 160MG + SULPHAMETHOXASOLE 800MG 1 X 10
35 TRIMETHOX FORTE TRIMETHOPRIM 160MG + SULPHAMETHOXASOLE 800MG 12 X 10 / 24 X 10
36 COREMYCIN E 250 MG TABLETS ERYTHROMYCIN STEARATE TABLETS BP 250 MG 10x10
37 COREMYCIN E 500 MG TABLETS ERYTHROMYCIN STEARATE TABLETS 500 MG 10x10
38 NORTOP 400 MG TABLETS NORFLOXACIN 400MG 10x10
39 NORTOP T TABLETS NORFLOXACIN 400MG + TINIDAZOLE 600MG 10x10
40 AMPICOR / AMIPEN 250 CAPSULES AMPICILLIN CAPSULES BP 250 MG 1 X 1000
41 AMPICOR / AMIPEN 500 CAPSULES AMPICILLIN CAPSULES BP 500 MG 10x10
42 MOXICOR - 250 AMOXYCILLIN CAPSULES BP 250 MG 1 X 1000 / 10 X 10
43 UMOX 250 MG CAPSULES AMOXYCILLIN CAPSULES BP 250 MG 10 X 100
44 MOXICOR / UMOX 500 MG CAPSULES AMOXYCILLIN CAPSULES BP 500 MG 10x10
45 CORCYCLINE 250 MG CAPSULES TETRACYCLINE CAPSULES BP 250 MG 1 X 10 X 100 / 25 X 10
46 CORCYCLINE 500 MG CAPSULES TETRACYCLINE CAPSULES BP 500 MG 10X10

SR NO. PRODUCT CATEGORY GENERIC NAME & STRENGTH UNIT PACK
47 CORLEX 250 MG CAPSULES CEPHALEXIN 250 MG 10X10
48 CORLEX 500 MG CAPSULES CEPHALEXIN 500 MG 10X10
49 DTO TABLETS OFLOXACIN 200 MG AND ORNIDAZOLE 600 MG TABLETS 10X10
50 AKTRIM SUSPENSION 240 MG / 5 ML TRIMETHOPRIM 40MG + SULPHAMETHAXAZOLE 200 MG 1 x 100 ML
51 F CLODAX CAPSULES FLUCLOXACILLIN CAPSULES 250 MG 1 x 100 ML
52 F CLODAX 500 CAPSULES FLUCLOXACILLIN CAPSULES 500 MG 1 x 100 ML
53 CLODAX D CAPSULES AMOXICILLLIN 250 MG + DICLOXACILLIN 250 MG CAPSULES 1 x 100 ML
54 CLODAX F CAPSULES AMOXICILLIN 250 MG + FLUCLOXACILLIN 250 MG CAPSULES 1 x 100 ML
55 COREMYCIN E SYRUP 125 MG / 5 ML ERYTHROMYCIN ESTOLATE FOR ORAL SUSPENSION USP 125 MG/5ML 1 x 100 ML
56 DACLOR SUSPENSION 50 MG / 5 ML CHLORAMPHENICOL PALMITATE 50MG/5ML 1 x 100 ML
57 MOXICOR SYRUP AMOXYCILLIN ORAL SUSPENSION BP 125 MG/5ML 1 x 100 ML
58 UMOX DRY SYRUP AMOXYCILLIN ORAL SUSPENSION BP 125 MG/5ML 1 x 100 ML
59 CORLEX SYRUP CEPHALEXIN 125 MG/250 MG/5ML 1 x 100 ML
60 AMPICOR SYRUP AMPICILLIN FOR ORAL SUSPENSION BP 125 MG/5ML 1 x 100 ML
61 AMIPEN SYRUP AMPICILLIN FOR ORAL SUSPENSION BP 125 MG/5ML 30 ML
62 CORCEF DRY SYRUP CEFIXIME FOR ORAL SUSPENSION USP 30 ML
63 CORZEE AZITHROMYCIN 250 MG TABLETS 10 x 10
64 UMOX PLUS DT TABLETS AMOXYCILLIN 200 MG + CLAVULANIC ACID 56.5MG TABS
65 UMOX PLUS 375 MG TABLETS AMOXYCILLIN 250 MG + CLAVULANIC ACID 125 MG TABS 10 x 1 x 10
66 UMOX PLUS 625 MG TABLETS AMOXYCILLIN 500 MG + CLAVULANIC ACID 125 MG TABS 10 x 1 x 10
67 UMOX PLUS 1GM TABLETS AMOXYCILLIN 875MG + CLAVULANIC ACID 125 MG TABS
68 UMOX PLUS SUSPENSION AMOXYCILLIN 125 MG + CLAVULANIC ACID 31.25 MG / 5 ML SUSPENSION 1 x 30ML
69 UMOX PLUS SUSPENSION 200 DS AMOXYCILLIN 200 MG + CLAVULANIC ACID 27.5 MG / 5ML SUSPENSION 1 x 60ML
70 MOXICOR C SUSPENSION AMOXICILLIN & CLAVULANATE POTASSIUM FOR ORAL SUSPENSION USP 1 x 60ML
71 GTO TABLETS GATIFLOXACIN 200 MG TABLETS + ORNIDAZOLE 500 MG TABLETS 10 x 10
72 CIPROFLOXACIN TABLETS USP 500 MG CIPROFLOXACIN TABLETS USP 500 MG 10 x 10 / 1 X 1000
73 CORCLAR DRY SYRUP CLARITHROMYCIN FOR ORAL SUSPENSION USP 125 MG / 5ML 1 X 30 ML
74 CORGATE 400 GATIFLOXACIN 400 MG 5`s
75 SPARCOR 400 SPARFLOXACIN 400 MG 6's
76 CORCEF 100 TABLETS CEFIXIME USP (as trihydrate) equivalent to anhydrous CEFIXIME 100 MG 20 x 1 x 10
77 CORCEF DRY SYRUP CEFIXIME FOR ORAL SUSPENSION USP 1 X 30 ML
78 CORCEF 200 TABLETS CEFIXIME USP (as trihydrate) equivalent to anhydrous CEFIXIME 200 MG 20 x 1 x 4
79 DECLAV 100 TABLETS CEFIXIME 100MG + CLAVULANIC ACID 125 MG 10 x 1 x 10
80 DECLAV 200 TABLETS CEFIXIME 200 MG + CLAVULANIC ACID 125 MG 10 x 1 x 10
81 DECLAV SUSPENSION CEFIXIME 50MG + CLAVULANIC ACID 31.25/5ML 1 X 30 ML
82 CORCEFO DRY SYRUP CEFPODOXIME For Oral SUSPENSIONS 50MG/5ML 1 X 30 ML
83 CORCEFO KID TABLETS CEFPODOXIME DISPERSIBLE ORAL TABLETS 10'S
84 CORCEFO-100 CEFPODOXIME PROXETIL USP equivalent to CEFPODOXIME 100 MG 1 x 10
85 CORCEFO-200 CEFPODOXIME PROXETIL USP equivalent to CEFPODOXIME 200 MG 1 x 10
86 CORZIT DRY SYRUP AZITHROMYCIN FOR ORAL SUSPENSION USP 200 MG / 5 ML 1 X 15 ML
87 CORZIT 500 TABS AZITHROMYCIN TABLET 500 MG 1 X 3
88 CORZIT CAPSULES AZITHROMYCIN CAPSULE 250 MG 1 X 6
89 CLARITHROCIN TABLETS CLARITHROMYCIN TABLETS 250 MG 1 X 10
90 NITO TABLETS NITAZOXANIDE 500 MG + OFLOXACIN 200 MG 10 x 10
91 GRISCOR 125 GRISEOFULVIN TABLETS 125 MG 10x10
92 GRISCOR 500 GRISEOFULVIN TABLETS 500 MG 10x10
93 GRISCOR SUSPENSION GRISEOFULVIN Oral SUSPENSION 125 MG /5 ML 100 ML bottle

2. Recent Development
Increasing Focus on Exports to drive Revenue growth and Profitability
Coral Labs is making continuous efforts to enhance its exports in order to drive revenue
growth and profitability. The Company’s export has increased to Rs.31.59 crores in FY15
from previous year of Rs. 25.59 crores registering growth of 23%. In FY15, company’s
exports contributed 50.9% of total revenue compared to 49.2% in FY14. With
management focus on driving exports in semi regulated markets, we expect revenue
from exports will increase significantly during next 2 to 3 years.
According to India Ratings, a Fitch company, the Indian pharmaceutical industry is
estimated to grow at 20 per cent compound annual growth rate (CAGR) over the next
five years. Presently the market size of the pharmaceutical industry in India stands at
US$ 20 billion. Branded generics dominate the pharmaceuticals market, constituting
nearly 70 to 80 percent of the market. India is the largest provider of generic drugs
globally with the Indian generics accounting for 20 per cent of global exports in terms of
volume.
The domestic generic drug market is expected to cross $27.9 billion from the current
level of $13.1 billion registering compound annual growth rate (CAGR) of about 16.3 per
cent particularly due to approval accorded by USFDA makers and 21 drugs patent losing
patent by 2019, according to a joint study by the Associated Chambers of Commerce
and Industry of India (Assocham) and RNCOS. The major export markets for the
country’s pharmaceutical products are Americas, Europe, China, Japan, Africa, and
others. The U.S. is single largest export destination. It accounts for nearly 28 per cent of
Indian pharmaceutical exports, followed by the European Union (18 per cent) and Africa
(17 per cent). The pharma exports to the U.S. market are high due to the large number
of approvals from the USFDA.
According to a study on ‘Generic Medicines in India - Promulgating Growth & Access ,
Generics would account for 85 per cent share in the domestic pharma market by 2020,
fuelled by cheap labour, patent cliff of blockbuster drugs and prevalence of lifestyle
diseases. Generic drugs account for 75 per cent of the domestic pharmaceutical market
by value. Drugs for cholesterol control, pain management, anti-coagulant, respiratory,
liver disorders, depression and lipid regulators are highly prevalent in the global market.
As per CARE Ratings, the drug patent expiry in the USA will create new opportunity for
Indian pharmaceutical industry in the coming years and the pharma industry will gain a
larger foothold in the world's generic market. In the long term, semi-regulated markets
like Latin America, Africa and Asia may offer the next growth avenues for Indian pharma
companies as these markets have high demand for drugs and relatively less stringent
regulatory compliance resulting in lower cost of servicing these markets.

Increase in Share Holding by Promoters
During last 5 years, promoters have increase their stake in the company by 10.29%,
from 61.28% in Mar’11 to 71.53% in Sep’15.
YEAR FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 Sep'15
Promoters Holding 61.28% 65.82% 69.86% 70.73% 71.57% 71.57%
% Increase (YoY) 0.0% 4.54% 4.04% 0.87% 0.84% 0.0% (6M)
During last 15 years, promoters have increased their holding in the company from a
meagre 15.05% in 2001 to the respectable 71.57% in 2015. Promoters buying own
company's share from the open market is a signal of highest commitment and
confidence in the company's business. From above, it is evident that promoters of the
company have steadily made purchases via open markets to increase their stake in the
company. Promoters buying shares from open market adds comfort in terms of
associated downside risk in stock price in case of market correction.
At the end of Sep’ 15, promoter shareholding stands at 71.57%. FII and DII investment is
nil in the company.
Moreover, there has been no equity dilution for the last 15 years, which is very
impressive. Company has not made any fresh issuances of equity capital and the equity
capital of Coral Labs is same at 3.57 crores since 2001.

3. Financial Performance
Coral Laboratories standalone net profit rises 14.06% in the September 2015 quarter
Net profit of Coral Laboratories rose 14.06% to Rs 2.84 crore in the quarter ended
September 2015 as against Rs 2.49 crore during the previous quarter ended September
2014. Sales rose 24.28% to Rs 18.07 crore in the quarter ended September 2015 as
against Rs 14.54 crore during the previous quarter ended September 2014
Coral Laboratories standalone net profit rises 84.67% in the June 2015 quarter
Coral Labs standalone net profit rises 84.67% in the June 2015 quarter to Rs 2.77 crore
in the quarter ended June 2015 as against Rs 1.5 crore during the previous quarter
ended June 2014. Sales rose 21.82% to Rs 13.96 crore in the quarter ended June 2015 as
against Rs 11.46 crore during the previous quarter ended June 2014.
1 2 3 4 5 6
Net Sales 11.46 14.54 13.55 17.94 13.96 18.07
Net Profit 1.5 2.49 2.95 2.63 2.77 2.84
11.46
14.54
13.55
17.94
13.96
18.07
1.5
2.49 2.95 2.63 2.77 2.84
0
2
4
6
8
10
12
14
16
18
20
RsinCrores
Jun 14 Sep 14 Dec 14 Mar 15 Jun 15 Sep 15
Last 6 Quarters Net Sales & Profit

Current & Expected Earnings
Quarterly Ended Profit & Loss Account
In FY 14-15, company export sales grew by 23% compared to last financial year and
contributed 50.9% of total revenue compared to 49.2% in FY14. As per our estimates,
company export contribution will increase to 55% over next 2 years.
Company has delivered steady growth over last couple of years with continuous
improvement in margins. With management increased thrust on exports, we expect
company will continue to achieve robust top line and bottom line growth going forward.
Particulars
(Rs in Crores)
Dec
2014
Mar
2015
Jun
2015
Sep
2015
Dec
2015 E
Mar
2016 E
Audited / UnAudited UA UA UA UA UA UA
Net Sales 13.55 17.94 13.96 18.07 17.13 21.97
Other Operating Income 0.25 0.72 1.18 0.1 0.21 0.41
Total Income - Operations 13.79 18.66 15.14 18.18 17.34 22.38
Raw Materials Consumed 8.38 9.38 9.45 10.36 9.67 11.55
Purchase of Traded Goods -- 0.45 -- -- -- --
Increase/Decrease in Stocks -0.76 0.73 -0.96 0.66 -0.45 0.51
Power & Fuel -- -- -- -- -- --
Employees Cost 1.13 1.16 1.08 1.09 1.31 1.32
Depreciation 0.38 1.41 0.48 0.48 0.48 1.50
Provisions And Contingencies -- -- -- -- -- --
Other Expenses 1.65 2.77 2.04 2.47 1.82 3.09
P/L Before Other Income 3.01 2.74 3.04 3.12 4.51 4.41
Other Income 0.55 0.81 0.45 0.48 0.31 0.51
P/L Before Int., E. Items & Tax 3.56 3.55 3.49 3.6 4.82 4.92
Interest 0.01 0.01 0.01 0.05 0.05 0.05
P/L Before E. Items & Tax 3.56 3.54 3.49 3.55 4.77 4.87
Exceptional Items -- -- -- -- -- --
P/L Before Tax 3.56 3.54 3.49 3.55 4.77 4.87
Tax 0.61 0.91 0.72 0.71 0.94 1.23
P/L After Tax – Ord. Activities 2.95 2.63 2.77 2.84 3.83 3.64
Extra Ordinary Items -- -- -- -- -- --
Net Profit/(Loss) 2.95 2.63 2.77 2.84 3.83 3.64
Equity Share Capital 3.57 3.57 3.57 3.57 3.57 3.57
Calculated EPS 8.25 7.35 7.75 7.96 10.73 10.20
Calculated EPS (Annualised) 33 29.4 31 31.84 42.92 40.80
No Of Public Shares Holding 0.1 0.1 0.1 0.1 NA NA
Public Share Holding (%) 28.43 28.43 28.43 28.43 NA NA

4. Peer Group Comparison
PEER GROUP
CORAL
LABORATORIES
NATURAL
CAPSULES
ALPA
LABORATORIES
VENUS
REMEDIES
CMP 552.50 159.20 79.15 133.20
52 W L/H 162.00/603.00 61.65/167.90 10.50/79.15 96.10/241.15
Market Cap 197.39 92.22 166.54 152.41
Results (in Crores) Sep-15 Sep-15 Sep-15 Sep-15
Sales 18.07 16.75 12.33 100.87
PAT 2.84 1.55 5.87 1.61
Equity 3.57 5.79 21.04 11.44
EPS (TTM) 31.32 10.15 3.74 -14.62
P/E 17.64 15.68 21.16 0.00
5. Key Concerns / Risks
 Coral Lab is present in the generics segment of pharmaceutical markets in different
countries. Presence of many players in the industry and offerings of cheap generic
products from unorganized sector is always a risk for the company.
 Coral Lab exports its Generic drugs to various countries like Sri Lanka, Myanmar,
Cambodia, Vietnam, Jordan, the Philippines, Afghanistan, Kenya, Nigeria, Malawi,
Chile, Cuba, Barbados, Jamaica, Ivory Coast, Costa Rica, Lesotho, Papua New Guinea,
Malawi, and Hong Kong , the governments of different countries apply periodic price
cuts on the pharmaceutical products so as to keep the healthcare cost under control
which can impact the margins of the company.
 Stringent regulations and quality standards are prescribed by the regulatory
authorities across the globe for the pharmaceutical products and their
manufacturing and supply chain processes in order to protect the interests of the
patients. Any deviation from the prescribed regulations or any variation in the
quality from the prescribed standards may lead to punitive actions by the regulatory
authorities.

6. Saral Gyan Recommendation
Coral Labs is having more than 2 decades of experience and offers whole array of
products which are decent on margins. As company exports to semi / less regulated
markets and do not supply to the US, company does not have risk associated with
USFDA stringent norms and regulations. Company has shown consistency in revenue
growth with strong margins in recent years. With increased focus of management on
exports in semi regulated markets, we expect net sales and PAT of the company to
grow at CAGR of 20% and 26% respectively during next 2 years.
The governments of various countries have been taking several cost effective
measures in order to bring down healthcare expenses. Thus, governments are
focusing on speedy introduction of generic drugs into the market. This too will
benefit Indian pharma companies. Coral Labs is among the many companies with a
large scale manufacturing portfolio and expertise to offer generic drugs in different
therapeutic segments.
Company has 3 state of the art plants with CGMP & FDA approvals. Company has
demonstrated healthy domestic growth as well in the past. In India, company is
doing well in the western and southern part. Company has complete portfolio of
injectable, syrups, cough syrups and tablets in antibacterial, antibiotics segment and
sells its products over the counter and on prescriptions. Company manufacture
around 400 generic medicines on a significant scale in about 15 dosage forms.
Company’s ROCE and PAT margins have seen continuous improvement over last 5
years and expected to further improve going forward considering robust revenue
growth from exports as well as domestic markets. We believe Coral Labs is getting
into a trajectory where business growth would be even faster. Company has
achieved revenue CAGR of 11.8% and profit CAGR of 15.43% during last 5 years.
Moreover, company is virtually debt free.
Key Financial Parameters Mar 2011 Mar 2012 Mar 2013 Mar 2014 Mar 2015
Return on Equity (%) 13.22 15.11 14.04 16.67 16.45
ROCE (%) 12.96 15.32 14.15 16.69 16.41
Operating Profit Margin (%) 18.52 18.97 18.19 19.87 20.75
Net Profit Margin (%) 12.67 13.47 13.81 15.44 15.18
Debt to Equity (%) 0 0 0.01 0 0.02
Working Capital Days 185 174 229 224 235
Promoters have increased their stake in the company by 5.75% in last 3 years which
gives further confidence in terms of company’s future growth prospects. As of
Sept’15, promoter’s shareholding is 71.57% without pledging any shares. FII and DII
shareholding in the company is nil.

Management has rewarded shareholders by paying consistent dividend since last 13
years. For last financial year, company has paid dividend of Rs. 2.50 per share and
dividend yield at current market price is 0.45%. With expected increase in revenue
and profitability in coming years, we believe company dividend payout will increase
going forward.
YEAR Mar'11 Mar'12 Mar'13 Mar'14 Mar'15
EPS 12.46 16.24 16.87 22.02 26.79
Dividend / Share (In Rs) 1.50 1.50 1.50 2.00 2.50
As per our estimates, Coral Labs can deliver PAT of 17 crores for full financial year
2016-17, annualized EPS of Rs 47.6 with forward P/E ratio of 11.6X for FY16-17.
Company’s valuation looks attractive compared to other pharmaceutical companies
operating in the same segment. Moreover, Coral Labs can continue to deliver
consistent revenue growth with strong margins during next 2 years.
On equity of Rs. 3.57 crore, the estimated annualized EPS for FY 16-17 works out to
Rs. 47.6 and the Book Value per share is Rs. 181.2. At current market price of Rs.
552.50, stock price to book value is 3.05.
Considering company’s steady growth with strong margins in past, increased thrust of
management on exports in semi-regulated markets and strong earning visibility with
robust business prospects, Saral Gyan team recommends “Buy” on Coral Laboratories
Ltd at current market price of Rs. 552.50 for target of Rs. 1100 over a period of 12 to 24
months.
Buying Strategy:
 70% at current market price of 552.50
 30% at price range of 450 - 470 (in case of correction in stock price in near term)
Portfolio Allocation: 3% of your equity portfolio.

7. Disclaimer
Important Notice: Saral Gyan Capital Services is an Independent Equity Research Company.
© SARAL GYAN CAPITAL SERVICES
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Report
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company.
c. Neither Saral Gyan, it's Associates, Research Analyst or his/her relative have actual/beneficial ownership of one
percent or more securities of the subject company
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the time of publication of the research report.
DISCLOSURE WITH REGARDS TO RECEIPT OF COMPENSATION:
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months.
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or third party in connection with the research report.
GENERAL DISCLOSURES:
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b. Saral Gyan or the Research Analyst has not been engaged in market making activity for the subject company.
Definitions of Terms Used:
a. Buy recommendation: This means that the investor could consider buying the concerned stock at current market
price keeping in mind the tenure and objective of the recommendation service.
b. Hold recommendation: This means that the investor could consider holding on to the shares of the company until
further update and not buy more of the stock at current market price.
c. Buy at lower price: This means that the investor should wait for some correction in the market price so that the
stock can be bought at more attractive valuations keeping in mind the tenure and the objective of the service.
d. Sell recommendation: This means that the investor could consider selling the stock at current market price
keeping in mind the objective of the recommendation service.
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