Thursday, 19 February 2015

VALUE PICK - PARNAX LAB LTD.


About The Company & Products 
Parnax Lab Ltd. is a pharmaceutical company headquartered in Gujarat.
The company has subsidiary named "Naxpar Pharma Ltd" which has manufacturing unit in Baddi (Himachal Pradesh) and is into bulk syrup and tablet formulation manufacturing for pharma giants such as Glenmark, Kopran, Pfizer, Ranbaxy, Sun Pharma, Wockhardt, Zuventus, Wanbury, Cipla and etc to name a few.

The company has a vast product portfolio with core segments being: Alimentary System, Cardiovascular System, Musculoskeletal System, Anti-Biotics, Anti-Malarials, Central Nervous System, Vitamin Supplements, Respiratory System and Skin including Herbal Comestics and Nutraceuticals.

The manufacturing facilities of the company is well equipped along with a separate area for Ayuverdic formulations.

Naxpar Pharma is looking to acquire FDA/MHRA/TGA/MCA accreditation soon for the Baddi unit which help them venture out into the large export markets.

The company has its subsidiaries in Africa and Nigeria and also has a presence in Mauritius and Kazakhstan.

The Ace Investor - Value Pick
(BSE:506128) PARNAX LAB LTD.
Company listed on BSE, Currently trading around 41-42 with a market cap of under 40 crores.
Promoter Holding is at 61.26%, Total Debt on the books is at just about 30 crores.
 15% of total promoter holding is pledged for secured loan included in the above total debt figure it comes at 9.19% of the total share-capital.
  
The company as mentioned above has giant pharmaceutical companies as its client.

Coming to financials, The standalone numbers are not impressive but if we take a look at the consolidated numbers the company is turning around at a good pace, Check the annual result table below:-

Particulars
FY12
FY13
FY14
Period
12 months
12 months
12 months
Sales
93.06
55.82
68.57
Operating Profit
0.36
7.44
8.28
OPM
0.39%
13.33%
12.08%
Other Income
0.63
0.96
1.10
EBIDT
0.99
8.40
9.38
Interest
4.25
3.82
3.65
Depreciation
1.90
1.93
2.10
Profit before tax
-5.16
2.64
3.64
Tax
-2.37
0.93
0.91
Net profit
-2.80
1.71
2.49
EPS
-3.29
2.01
2.93
 
 As it can be seen above, The company is a relatively new pharma company after the merger of three subsidaries and it is turning around, For FY12 company was in loss and after FY13 it has shown sales growth of 22.84% YoY in FY14.

This was the performance till FY14, Now let us take a look at FY15.
Company recently announced stable numbers for Dec-14 Quarter, and now we are only one quarter away from getting the FY15 number.

Check the table below for the FY15 quarterly performance so far:-

Particulars
JUN 14
SEP 14
DEC 14
MAR 15
FY15
FULL YEAR
(In Crores)



PROJECTED
PROJECTED
Sales
21.30
27.03
28.76
28.76
105.85
Net profit
0.89
1.78
1.66
1.66
5.99
Adjusted EPS in
1.05
2.01
1.96
1.96
6.98

As seen above we have taken the flat Dec-14 performance to be repeated in next quarter which will take the sales to 105.85 crores and EPS to 6.98.
 
Price to earning ratio of the company comes at around 6 by taking the projected FY15 number.
P/E of 6 is extremely low when compared with other pharmaceutical stocks and industry average of more than 30.

 Now this being a turn-around story, As i have said in past while looking for turnarounds i prefer to go for companies at cheap valuations which have already turned around rather than going for companies which are still showing losses and yet to turn-around.


Parnax promoters have bought 30,100 shares from open market on 3rd February 2015 around the price of 32.50 

Recently another Pharma company named "Godavari Drugs" has turned around, It has business similar to Parnax but the clients and product line information is not known. The Godavari promoters have been aggressively increasing their stake by buying from the open market and have increased their holding to just less than 50% now.

If we see the trailing numbers for Godavari it has sales of just 42 crores which is a lot lower than Parnax, Net Profit is at 3.73 crores and the EPS is at 4.97.

Godavari Drugs from the beginning of 2014 has shown a huge rally (from Rs 7.77 to Rs 72.60 with recent 52wk High of 86.85) to trade at a P/E of 17.47.

While Parnax from the beginning of 2014 was at Rs 50 and now is at 41 which means there has been no rally despite the turn-around and the P/E of around 6 is extremely cheap.

Parnax stock can undergo heavy re-rating and if Parnax keeps growing at this rate which it should then it should be trading at significantly higher valuations.

As said Godavari after turn-around traded at a P/E of 17.47, Similar pe of around 15 will take Parnax to 105 levels if full year EPS is actually at 6.98.

All in all i feel Parnax is a value pick right now and investors should go for it, Last few days heavy accumulation has been noted in Parnax after December quarter results announcement which might be promoter buying yet to be disclosed to exchange. 

105 would be fair level for Parnax with current set of earnings however in future if company expands with the FDA approval and does the right things it can trade at significant higher levels and I feel something great can be cooking in this counter since promoters have purchased from the open markets and earnings have improved simultaneously.

If Godavari can trade at 17.47 P/E so should Parnax which has higher sales than Godavari.

23 comments:

  1. Sir,

    Enetered at 47.5@2000. Is it valuable price.please sugest

    ReplyDelete
  2. I also entered 48. But am really confused it is worth at this price, after checking todays status. lo -39 to 47 we could but this level around 40~35.

    Ace sir any suggestion?

    ReplyDelete
    Replies
    1. Use ace sir as a guide, not as someone whom u will listen blindly. One of the ways to take advantage of his calls is to first see whether the stock volume is high or very thin. If volumescare thin, then it makes sense to bid high. Else better to wait till next few days. Of course you shud read the data first and see if the stock suits your goals and appetite. Of course ace sir runs this blog for his own profit as well, he is not doing any charity here. But you shud know that hnis have to pay a lot of money to get researched advice like this. Be happy wecare getting it for free.

      Delete
  3. Your view on Pochiraju and mic electronics

    ReplyDelete
  4. sir this i am posting 6th time please approve
    thanks a lot dear ace.... for giving gem like parnax
    it is much better than rubbish stocks like morepen and jagsonpal pharma
    thanks once again ace i have purchased at 44 today

    ReplyDelete
  5. With all respect to you and the investor community follows your blog Let me tell you please don't misguide poor investors with your greed. You are just an operator only playing for some one and I AM DAMN SURE YOU WILL NEVER PUBLUISH THIS COMMENT AS IN THE PAST CAN YOU TELL WHICH OF YOUR RECENT RECOS MADE INVESTORS HAPPY????

    ReplyDelete
    Replies
    1. Thank you for your views, you can choose to unfollow the blog.

      Delete
    2. Dude, worry about yourself. Dont be here if you care about "poor investors". Everyone has a head to take decisions.
      I am one of the followers of this blog. I have made 44% profit since last november only on the stocks recommeded on this blog. One just needs to research and time a little better instead of following blindly.

      Delete
    3. no one has forced you anonymous to read calls here mind your own business
      and why dont you come with your original id to post here?

      Delete
  6. promoter buying from open market great turn around in company and such cheap valuations
    i think parnax is one of your best calls it should appreciate to minimum 100+

    ReplyDelete
    Replies
    1. A real analysis for a real fundamental analyst

      Delete
  7. Those who r still holding richa ...congratz unpple have a gem in ur hand....parnox is a gem as well....all r long term bets ...dnt dream to be rich overnight...all calls r long term and not for short term :-)

    ReplyDelete
  8. Hi Ace,

    What is your opinion on Makers Labs, Brooks Labs, Panchsheel Organics?

    Thanks!

    ReplyDelete
    Replies
    1. had makers lab in portfolio earlier, recently booked it out.
      brooks labs looks decent at current levels and i am not tracking panchsheel.

      Delete
  9. Hi sir,

    The sales and profit which you had posted in your blog are not matching at all.so please look into that.

    ReplyDelete
    Replies
    1. I have looked into everything, You please look at the consolidated results.

      Delete
    2. Hi sir,

      The total sales of 2014 year is 19.03 cr and net loss is 1.21 cr and for december quarter the sales is 4.89 cr and net loss is 0.38 cr...

      Delete
    3. Please see this Mr Reddy:
      http://www.bseindia.com/corporates/results.aspx?Code=506128&Company=PARNAX%20LAB%20LTD.&qtr=81.50&RType=c

      Delete
    4. Hello sir,

      Its my mistake to check the standalone results instead of checking consolidated one,but as far as standalone results are concerned it is not performing well and when we check consolidated results I feel the share is far far undervalued at CMP 26,I think the investors are not considering consolidated ones...

      Delete
  10. merger document is sent to you by email

    ReplyDelete
    Replies
    1. Merger has been cancelled long back.

      Delete