Re: Jenburkt Pharma- 49 Pages Analysis Report-With Div.Yield of 6.15 % & RoCE of 40 G
Niche pharma formulations company Jenburkt Pharmaceuticals Ltd. announced its Q3FY11 results on 29th Jan. 2011. Robust margin expansion continues in Q3FY11 with consistent topline growth which is likely to make FY11 the highest cash-generating fiscal year in the company's history of existence. This augurs very well for the future of the company as the company is on verge of launching a couple of innovative products in Indian market with a focus on brand-building. Given below are the highlights of Q3FY11 results :
(1) Jenburkt reported a topline of Rs. 14.57 cr. in Q3FY11 which translates into YoY growth of 17.3 %.
(2) EBITDA for Q3FY11 stands at Rs. 2.65 cr. which translates into a YoY growth of 60.6 %. EBITDA margins stand at a healthy 18.2 % which translate into an expansion of 490 basis points YoY. It is worthwhile to note here that all the three qrtrs. of FY11 have seen healthy expansion of margins which is a clear result of the company's focus on high margin products as well as pick-up in product approvals offshore.
(3) Operating Profit for Q3FY11 stands at Rs. 2.42 cr. which translates into a YoY growth of 68 %. OPM stands at a healthy 16.6 % which translates into an expansion of 501 basis points YoY. It is worthwhile to note here that all the three qrtrs. of FY11 have seen healthy expansion of margins which is a clear result of the company's focus on high margin products as well as pick up in product approvals offshore.
(4) PAT (Net Profit) for Q3FY11 stands at Rs. 1.7 cr. which translates into a YoY growth of 136.1 %. NPM stands at a healthy 11.7 % which translates into an expansion of 590 basis points YoY.
(5) For nine months ending December 2010, Jenburkt's topline stands at Rs. 42.96 cr., Operating Profit at Rs. 7.43 cr. while PAT stands at Rs. 5.08 cr. which translates into a YoY growth of 9.8 %, 93.5 % and 135.2 % respectively. It is worthwhile to note here that in the first nine months itself, company has grossed a net profit of Rs. 5.08 cr. which is even higher than entire FY10's net profit of Rs. 3.77 cr. This marks the start of an era of investments made by the company over last decade initialising bearing fruits which augurs very well for the company's financials in the medium to long term.
(6) One most important thing to note here with regards to quality of earnings reported so far in FY11 by the company is that the astonishing growth in margins is coupled with a healthy increase in depreciation and tax outgo which themselves have risen by 18 % and 51.7 % respectively. The growth has entirely come from the core business of the company without any increase in other income. The Tax outgo stands at 28.7 % of reported operating profit which vindicates high quality earning reported by the company.
(7) R&D expense for Q3FY11 stands at 2.91 % of topline which is the highest in company's history and signals stage getting set for innovative product launches by the company in FY12.
(8) Employee Cost for nine months ending December 2010 has increased by 13.6 % YoY and stands at 19.3 % of reported topline which signals strengthening of marketing network by the company as also senior level recruitment by the company for brand-building.
(9) Promoters continue to show confidence in the future of the company which is evident from a further creeping acquisition of 0.26 % equity of the company by the promoters in Q3FY11. Promoters holding in the company now stands at 44.2 % up from 43.94 % of Q2FY11 & 42.75 % of FY10.
Revision in Projected Financials :
Better than expected margins registered by the company in Q3FY11 have necessited an upward revision in projected financials of next 3 years. Here again, Considering the business traction as well as the product pipeline Jenburkt has, as also making part consideration for the fruits expected from the investments made by the company so far, we will arrive at a conservative estimate for next 3 years so that management has an opportunity to surpass them again. Financials forecast for next 3 years is given below :
FY'11
FY'12
FY'13
(in ` cr.)
Sales
55.8
74.3
99.6
EBIDTA
10.01
14.45
20.1
Operating Profit
9.2
13.1
18.4
Net Profit
6.41
9.8
14.1
It is worthwhile to mention here again the vision of the management to chart on the self-sustainable growth plan while turning a zero-debt company within few years. We expect Jenburkt to turn zero-debt in FY13 and expect no meaningful fund-raising via equity issuances unless any major expansion is planned which is not talked till date.
Based on the projected financials, Jenburkt is expected to end current FY11 with an EPS of Rs. 13.81, FY12 with an EPS of Rs. 21.12 and FY13 with an EPS of Rs. 30.4.
Likely Dividend for FY11 :
Because of the robust cash generated by the company in FY11 as also management's policy of distributing the cash handsomely amongst minority shareholders we expect a Dividend of minimum Rs. 5 per share which will mean a dividend yield of 6.1 % at current market rate of Rs. 81.9.
Outlook on the Company :
We maintain our earlier argument that it is rare to find safe companies like Jenburkt with a RoCE and RoE of 35 % + and a dividend yield of 6.1 % available at a P/E of just 5.93 and at EV/EBITDA of just 3.41 in an uncertain market that we have today. Such robust parameters are coupled with a good visibility of future growth in the form of company's focus on high margin products and brand-building as also likely launch of two innovative products in FY12. On the whiff of smallest positive trigger the stock is expected to get rerated and reach our estimated fair price of Rs. 158 very soon.
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