Financial Analysis :-
Marksans pharma is growing at a decent pace over the year with 13% CAGR but since it has come out of bankruptcy it makes phenomenal progress.
Sales growth with improving OPM and NPM shows the management capability and potential to grow in future as well.
It's Inventory turnover ratio is stable and increasing hence not much to dig dip but along with it it's asset turnover ratio is not stable and decreasing along with high days of receivables which is a cause of concern for us.
So let's dig dipper to CFO and PAT ratio.Which is showing almost at per for last three years if we will not go deep into the bankruptcy period. So on the receivable front we might not have this much of worry.
Now for the decreasing asset turnover ratio it is mainly due to average raw material holding cost which has increased from 184cr to 850cr within one year mainly due to there expansion plan[acquisition] and fluctuating currency rate, but they have been able to maintain a stable number of days in working capital and average finished goods held over the years also along with a stable and increasing inventory turnover ratio hence this can be seen from a positive point.
SSGR is at 58% and 3years SSGR is at 35% which has shown a clear improvement on it's operating ability also as it consider net fixed asset and it shows a continuous improvement of NFAT and currently stand at 5.11 the increase is also driven profit margin growth over the years hence we can conclude it will not be requiring much debt in future to support it's operation.
Now coming to the part of free cash flow we can see it has generated a good amount of cash over last three years and free cash flow is gradually improving hence we can be rest assured it can fulfill it's new investment need without going for any further debt as cash in stand at 185.27cr at the year end.
It also has increase it's interest coverage as well as reduction in it's debt consistently over the last 3 years which is a significant show of there management integrity towards there lenders. Only a credible business can do so in small span of time.
As we can see the company has been able to maintain a stable current ratio and for last three years it is on an uptrend hence this is a show of stability.
Now it also created a good value for shareholders over the years in particulars last three year is exceptional. If we follow the data here we can see last three year everything is positive and no abnormality in the growth like it has happened way back in 2009 this is a clear sign of sound value creation over last three years.
Valuation Analysis :-
Now a couple of interesting facts to note here as from the data available we can see PE stands at 38% and PEG at 6.7 and PB at 10.5 hence valuation is reasonably high and provide no margin of safety. Now coming to the very crucial question should we go for a buy or not? because if we go by Graham rule we might would have avoid this highly valued stock . But if we dig deeper we can see the enterprise value is on the negative side hence grossly undervalued company along with EV/EBITDA stands at -0.30 so lots of potential to grow along with the fact this is still a small cap company with Mcap of only 4187 Cr. More over they haven't show up the earning of Time-Cap hence if we can consolidate this then we can have a fairly low PE as well.
Business :-
Marksans Pharma Limited thus engages in large-scale distribution of
pharmaceutical products. Research and Development (R&D) is yet
another crucial engagement of Marksans Pharma Limited. Contract research
and manufacturing services (CRAMS) is offered by Marksans Pharma
Limited to various pharmaceutical companies based worldwide.
The reasearch & development functions at Marksans Pharma Limited
consists of services related to dossier development, formulation
development, chemical synthesis, process optimization, analytical
development and specified drug delivery system. Marksans Pharma Limited
also conducts stability studies.
Through its domestic formulation
business, Marksans Pharma Limited focuses on oncology and critical care
therapy in a specialized format..
Marksans Pharma Limited has expanded its presence to therapeutic
segments like analgesics, decongestants, anti- diabetics. Marksans
Pharma Limited has three subsidiaries that aid the running of the
business. These subsidiaries under Marksans Pharma Limited are Nova
Pharmaceuticals (Australia), Bell’s & Sons (UK) and Relonchem Ltd
(UK).
OTC product like ointment and gel has a cost advantage.
Marksans Pharma Limited has its headquarters at Mumbai (India). Plants
under Marksans Pharma Limited have gained prestigious certifications and
approvals from the US FDA, UK MHRA, Australian TGA among other foreign
authorities on health-care.
