Amrutanjan Health Care Ltd. BSE Scrip Code:

Transcription

1 Amrutanjan Health Care Ltd. BSE Scrip Code: Pharmaceuticals September 13, 2012 Equity Statistics Current Market Price Rs Week High/Low Rs / Market Capitalisation Rs. Crores Free Float Rs. Crores Dividend Yield % 1.90 One Year Regression Beta Times 0.12 BSE Volumes Trend - Average = Thousand Relative Returns Returns 1M 3M 6M 1 Yr Absolute 3% 2% 4% -2% Rel. to Sensex 0% -5% 2% -10% Shareholding Pattern 100% 80% 60% 40% 20% 0% Amrutanjan Sensex Sep `11 Dec `11 Mar `12 Jun `12 Promoter DII FII Others Business Summary Amrutanjan Health Care Ltd. (Amrutanjan) is engaged in the manufacture and sale of OTC (over-the-counter) healthcare products. A well-known brand in the South Indian market, Amrutanjan s products primarily focus on pain management, congestion management and personal hygiene under the brands Kick Out Pain, Relief and Purity, respectively. The company s products consist of balms, creams, reusable gel pad and roll-on for relief from headache, joint spray, body ache and cough & congestion. The company also offers food products in the form of snacks and fruit juices. The company has two plants for its OTC division located in Tamil Nadu and Andhra Pradesh and one plant for its Pharmaessense Chemistry Services Division, located in Tamil Nadu. In May 2011, this division was transferred to a wholly owned subsidiary viz, Amrutanjan Pharmaessense Private Limited. The Pharmaessense R&D division introduced 11 new products in FY11 and 9 new products were estimated to be introduced in FY12 (refers to the period April 1 to March 31). The company s R&D department is recognized by Department for Scientific & Industrial Research (DSIR) and focuses on development of new products and improvement in the existing products. The company also undertakes collection and extensive research of consumer insights for improving its existing products or launching new products. In FY11, Amrutanjan diversified into non-carbonated beverages industry by acquiring Siva s Soft Drink Pvt Ltd. (SSD), which owns the Fruitnik brand of fruit juices, a known brand in Tamil Nadu. As on March 31, 2011, Amrutanjan held the entire stake of SSD and had investments of Rs.25.7 cr in SSD. In FY12, the company reported net sales of Rs crore and a net profit of Rs.9.6 crore. KAL is currently trading at 24.1 times FY12 EPS and 2.4 times FY12 adjusted book value. Board of Directors Person Role Qualification S.Sambhu Prasad Chairman & MD B.Tech, M.B.A D.Seetharama Rao NED B.E. Dr.Pasumarthi NED - Dr H.B.N Shetty NED, Independent MA., M.L., Ph.D A.Satish Kumar NED, Independent M.B.A Source: Annual Report and CARE Research Note: MD: Managing Director, WTD: Whole time Director ED: Executive Director, NED: Non Executive Director, Source: BSE and CARE Research 1 Initiative of the BSE Investors Protection Fund

2 Background Amrutanjan was established as a patent medicine business in Mumbai in 1893 by Sri. K Nageswara Rao Pantulu. The headquarters was shifted to Chennai in In a recent development in February 2012, Mr Sambhu Prasad, MD, was redesignated as the Chairman and MD of the company. Furthermore, the board approved the merger of SSD with Amrutanjan. As Amrutanjan is offering OTC products under the rubefacient category, the marketing and distribution aspects will be key to expand the reach of Amrutanjan s products. The company s products are sold through a strong distribution network, well supported by over 3.5 lakh retailers and 1,750 stockists as on March 31, Other than SSD, Amrutanjan has a subsidiary by the name of Holistic Beauty Care Ltd., for which there was no commercial operation in FY11. The company plans to exit from another subsidiary, i.e. Data Quest Infotech & Enterprises Ltd. (DQI), in which Amrutanjan held Rs.3 cr of investments as on March 31, Amrutanjan has also granted loans & advances of Rs.17.1 cr to DQI as on March 31, Amrutanjan bought back 106,937 fully paid up equity shares of Rs.10 each at a tender offer at a price of Rs.900 per share through a share buyback program, which was completed in July On completion, the company s share capital was reduced to Rs.2.9 cr as on March 31, 2012 from Rs.3.0 cr as on March 31, The board of directors recommended a final dividend of Rs.10 per share for FY12. In August 2012, the company s board of directors approved sub-division of the existing equity share of nominal value of Rs.10 into two equity shares of nominal value of Rs.5 each. Business overview With the addition of the Fruitnik brand during the year, Amrutanjan operates in three business segments namely OTC products, chemicals and beverages. It derived 80% of the revenue from OTC products and 14% of the revenue from the beverages segment in FY12. The company earns its revenues majorly from the domestic market. The company generally earns an EBITDA margin of 11-15% wherein the key expense is towards consumption of materials. Amrutanjan has incurred significant cash outgo for advertising and marketing programs, which are crucial in case of fastmoving OTC products. On a consolidated basis, the company spent Rs.9.8 cr in FY12 for advertisement as against Rs.7 cr in FY11, reflecting the importance attached to branding initiatives. Net Sales of the company went up from Rs crore in FY 11 to Rs crore in FY12, registering a growth of 35.3%, whereas PAT came down to Rs.9.63 crore from Rs crore in the same period. Strengths and growth drivers Amrutanjan has a longstanding track record of operations and an established brand name The marketing and distribution networks are effective, which are necessary in case of fast-moving OTC product segment Risk and concerns The company is exposed to raw material price volatility and rising input costs, such as the increasing manpower costs and purchase costs of materials The segments in which Amrutanjan is present are intensely competitive Also key to the profitability of Amrutanjan will be the performance of the newly-added beverages segment Future strategy and expansion plans The company aggressively pursues marketing and advertising communications, which is necessary for any FMCG/OTC based brand to retain its market share. Also the company undertakes diversifications such as the entry into the beverages segments and plans to strengthen its distribution networks. Industry outlook The Indian Pharmaceutical Industry (IPI) is amongst the largest in the world and has grown to a total market size of Rs.117,860 crore (around US$26 bn) in FY2011E (Source: Dept of Pharmaceuticals/CARE Research estimates) backed by robust growth in terms of healthcare infrastructure development, technology base and a wide range of products. Total market size includes the domestic market, the export and the import markets. The IPI is now the third-largest in the world in terms of volume and 14 th -largest in terms of value thereby accounting for around 10% of world s production by volume and 2% by value due to lower prices. The industry now produces about 500 bulk drugs (Active Pharmaceutical Ingredients-API) and almost the entire range of formulations related to all major therapeutic groups requiring complex manufacturing technologies. The domestic formulations market constitutes the single-largest chunk of the IPI (approximately 80% of the IPI) and serves all major therapeutic segments meeting all domestic requirements. It is primarily dominated by branded generic drugs. This is supported by availability of strong scientific and technical manpower backed by pioneering work done in process development. 2 Initiative of the BSE Investors Protection Fund

3 The bulk drugs industry has grown at a CAGR (Compounded Annual Growth Rate) of 15% over (Source: Bulk Drugs Manufacture Association, India). With the growing presence of generic products in the innovator companies portfolio the demand for quality APIs at cheaper rates has increased so as to face the rising price erosion in the generic market. Also the presence of Indian CRAMS (Contract Research and Manufacturing Services) has increased among the drug innovators which will further boost the exports of bulk drugs. Peer comparison Year ended March 31, 2012 Income statement (Rs. crore) Amrutanjan Panchsheel KDL Total income Net sales EBITDA Ordinary PAT Adjusted PAT Per share data (Rs.) Adjusted BVPS Diluted EPS* Growth (Y-o-Y) (%) Growth in Total income (33.4) Growth in Net sales (34.9) Growth in EBITDA Growth in Adjusted PAT (5.9) (41.1) Growth in EPS* (41.9) Profitability ratio (%) EBITDA margin Adjusted PAT margin Valuation ratios (Times) Price/EPS (P/E) Price/Book value (P/BV) Enterprise value (EV)/EBITDA Note: KAL: Kerala Ayurveda Ltd; Panchsheel: Panchsheel Organics Ltd., KDL: KDL Biotech Ltd. Note: Panchsheel and KDL are based on abridged financials Quarterly financials Quarter ended June 30, 2012 Income statement (Rs. crore) Q1FY13 Q4FY12 Q3FY12 Q2FY12 Q1FY12 Total income Net sales EBITDA Ordinary PAT Adjusted PAT Growth (Q-o-Q) (%) Growth in net sales (55.2) (13.0) Profitability ratio (%) EBITDA margin Adjusted PAT margin Initiative of the BSE Investors Protection Fund

4 Financial analysis In FY12, Amrutanjan Healthcare reported net sales of Rs crore up 35.3% y-o-y whereas the PAT came down to Rs9.6 crore from Rs10.2 crore during the same period. Raw materials and packaging form the largest portion of cost for Amrutanjan. In FY12, raw materials cost as a percentage of net sales was at around 43%. The other major expenses include Employee cost and Advertisement expenses. The company reported EBITDA margins and adjusted PAT margins of 14.3% and 6.5%, respectively in FY12. The total debt as on March 31, 2012 was at Rs crore compared to an networth of Rs crore. Operating cash flows for the company has been positive in each of the last four years (i.e. period considered for analysis). The company has not paid dividend for the past five years ended FY12. Annual financial statistics FY08 FY09 FY10 FY11 FY12 Income statement (Rs. crore) Total income Net sales EBITDA Depreciation and amortisation EBIT Interest PBT Ordinary PAT Adjusted PAT Balance sheet (Rs. crore) Adjusted networth Total debt Cash and bank Investments Net fixed assets (incl. CWIP) Net current assets (excl. cash, cash equivalents) Per share data (Rs.) Adjusted BVPS Diluted EPS* DPS Growth (Y-o-Y) (%) Growth in total income (50.8) Growth in net sales 21.6 (1.0) Growth in EBITDA (9.7) Growth in adjusted PAT (25.7) (0.3) (5.9) Growth in EPS* NM (87.7) (11.4) 5.0 Key financial ratio EBITDA margin (%) Adjusted PAT margin (%) RoCE (%) NM RoE (%) Gross debt - equity (times) Net debt - equity (times) 0.2 (0.7) (0.2) Interest coverage (times) Current ratio (times) Inventory days Receivable days Initiative of the BSE Investors Protection Fund

5 DISCLOSURES Each member of the team involved in the preparation of this grading report, hereby affirms that there exists no conflict of interest that can bias the grading recommendation of the company. This report has been sponsored by the BSE Investors Protection Fund. DISCLAIMER CARE Research, a division of Credit Analysis & REsearch Limited [CARE] has taken utmost care to ensure accuracy and objectivity while developing this report based on information available in public domain or from sources considered reliable. However, neither the accuracy nor completeness of information contained in this report is guaranteed. Opinions expressed herein are our current opinions as on the date of this report. Nothing in this report can be construed as either investment or any other advice or any solicitation, whatsoever. The subscriber / user assumes the entire risk of any use made of this report or data herein. CARE specifically states that it or any of its divisions or employees do not have any financial liabilities whatsoever to the subscribers / users of this report. This report is for personal information only of the authorised recipient in India only. This report or part of it should not be reproduced or redistributed or communicated directly or indirectly in any form to any other person or published or copied for any purpose. PUBLISHED BY CARE Research is an independent research division of CARE Ratings, a full-service rating company. CARE Research is involved in preparing detailed industry research reports with 5-year demand and 2-year profitability outlook on the industry besides providing comprehensive trend analysis and the current state of the industry. CARE Research also offers research that is customized to client requirements. Credit Analysis & REsearch Ltd. (CARE) is a full service rating company that offers a wide range of rating and grading services across sectors. CARE has an unparallel depth of expertise. CARE Ratings methodologies are in line with the best international practices. Head Office: 4th Floor Godrej Coliseum, Off Eastern Express Highway, Somaiya Hospital Road, Sion East, Mumbai Tel: Fax: Regional Offices: New Delhi Kolkata Ahmedabad Bangalore Hyderabad Chennai Pune Published on behalf of The Stock Exchange Investors' Protection Fund First Floor, P J Towers, Dalal Street, Mumbai. Tel: /34