Jan/15 Feb/15 Mar/ Apr/15 May/ Jun/15 Jul/15 Aug/15 Sep/15 Oct/15 Nov/ Dec/15 Parnax Lab Limited CMP: 53.90 January 08, 2016 Stock Details BSE code 506128 BSE ID PARNAXLAB Face value ( ) 10 No of shares (m) 8.5 Market cap ( m) 458 52 week H/L 63.90/21.05 30 days avg. daily vol (No) 51,870 Free float ( m) 174 Dividend yield FY15 (%) Stock performance (%) Absolute Rel. to Sensex nm 1M 3M 12M 5.4% 62.7% 71.4% 6.2% 7% 80.8% Shareholding Pattern* (%) Promoters FIIs DIIs Others 62.59% % % 37.41% *As of September 2015 Relative Chart 70 60 50 40 30 20 10 Parnax lab Ltd Sensex 30,000 29,000 28,000 27,000 26,000 25,000 24,000 23,000 Company Overview The Naxpar Group was founded in the 1985, which offers quality-driven and reliable services in pharmaceutical and cosmetics manufacturing. Over the years, Naxpar has grown, spreading its geographic reach and expanding its production capacity. Currently, Naxpar is listed on the Bombay Stock Exchange (BSE) under the name Parnax Lab Ltd. The Naxpar Group is headquartered in Mumbai, India. Industry Overview India is among the top six global pharmaceutical producers in the world and exports vaccines to ~150 countries. It is the largest provider of generic drugs globally with the Indian generics accounting for 20 % of global exports in terms of volume. The Indian pharmaceuticals market is the third largest in terms of volume and thirteenth largest in terms of value, as per a report by Equity Master. Branded generics dominate the pharmaceuticals market as they constitutes to nearly 70%-80% of the market. The pharmaceutical industry of India is highly fragmented. Financial Performance Paranax Lab reported a revenue 1,027.5 million in FY 15, up by 49.8% YoY. The company reported a net loss of 192.3 million for the fiscal year 2015. For the second quarter of FY 16 company reported a top line of 28.3 million, down 36.4% YoY. Bottom line was at (3.7) million. Table1: Key Financials (Y/e March) Q2 15 Q2 16 0 22,000 Sales ( m) 558.2 685.7 1,027.5 44.45 28.3 YoY Growth (%) -4% 22.8% 49.8% -73.7% -36.4% EBITDA ( m) 16.9 25.3 46.3 5.4 0.6 Source: Bloomberg EBITDA Margin 3.0% 3.7% 4.5% 12.2% 2.1% PAT ( m) (144.0) (169.0) (192.3) 0.3 (3.7) EPS ( ) 2.0 2.9 5.0 3-0.44 YoY Growth (%) -161.1% 45.8% 71.0% -98.3% -1566.7% Source: Company, Karvy Investment Advisory 1
Background and Business Description The Naxpar Group was founded in the 1985, which offers quality-driven and reliable services in pharmaceutical and cosmetics manufacturing. Over the years, Naxpar has grown, spreading its geographic reach and expanding its production capacity. Currently, Naxpar is listed on the Bombay Stock Exchange (BSE) under the name Parnax Lab Ltd. The Naxpar Group is headquartered in Mumbai, India. The company has achieved significant milestones such as the coveted ISO 9002 status from RWTUV, Germany for following Good Quality Systems in manufacturing and marketing of formulations for domestic and international markets. The Company now has state-of-the-art accredited manufacturing facilities with high speed packing lines in Silvassa (D&NH, India) Baddi (Himachal Pradesh, India). Key Strengths The key strength for the company is manufacturing finished formulations for multinationals in India and abroad and in emerging pharmaceutical markets such as Nigeria, Kazakhstan, Kenya, Mauritius etc. Company is now well placed into following markets such as South East Asia, CIS, LatAm etc. Risks & Concerns Government policies Intense competition Board of Directors Table 2: Composition of Board Name Mr. Prakash M Shah Mr. Baiju M Shah Mr. Vindyak B Desai Mr. Manharbhai N Jhavari Mr. Tirunillai V Anatharaman Mrs. Ami M Shah Source: Company Relation with Company Whole Time director & CEO Whole Time Director& CFO Independent and Non-Executive Director Independent and Non-Executive Director Independent and Non-Executive Director Women Non-Executive Director 2
Industry Overview India enjoys an important position in the global pharmaceuticals sector. The country has a large pool of scientists and engineers with the potential to steer the industry ahead to an even higher level. The Indian pharmaceuticals market is the third largest in terms of volume and thirteenth largest in terms of value, as per a report by Equity Master. The market is highly fragmented and branded generics dominate the pharmaceuticals market as they constitutes to nearly 70%-80% of the market. The country s pharmaceutical industry accounts for about 1.4 per cent of the global pharmaceutical industry in value terms and 10 per cent in volume terms and it India exports all forms of pharmaceuticals from APIs to formulations, both in modern medicine and traditional Indian medicines and its exports for FY 15 stood at $15.2 billion. The Indian pharmaceutical market size is expected to reach $ 27 billion by 2016 and $100 billion by 2025 in the wake of increasing consumer spending, rapid urbanization and raising healthcare insurance. According to Indian ratings, the Indian pharmaceuticals industry is expected to grow over 15% per annum for the period 2015-2020 and will outperform the global pharmaceuticals industry which is estimated to grow at an annual rate of 5% for the same period. India currently has 10,500 manufacturing units and over 3,000 pharmaceutical companies which are growing at an exceptional rate and it also has about 1,400 WHO GMP approved manufacturing units. The Government of India has announced a flurry of measures to create a facilitating environment for the Indian pharmaceutical industry. Its policies are aimed at building more hospitals, boosting local access to healthcare, improving the quality of pharmaceuticals and improving the quality of medical training. In the light of the initiatives being set up by the Government of India, the Indian pharmaceutical industry is expected to witness a rapid growth in the coming years. Peer group analysis Company CMP ( ) Mcap ( m) Rev ( m) OPM (%) EPS ( ) PE (x) Parnax Lab Ltd. 53.90 458.0 166.3 2.76% (1.41 NM Vista Pharmaceuticals Ltd. 15.20 228.0 83.0 15.04% 0.31 49x Unjha Formulations Ltd 20.45 91.6 89.30 3.63% 0.49 42x Source: BSE 3
Financial Analysis Parnax lab reported revenue of 1027.5 million for FY 15, up 49.8% YoY from 685.7 million in FY14. Net profit for the company was at 42.6 million in FY15. Earnings per share increase to 5.0 in FY15 from 2.9 in FY14. Profitability ratios were also at good levels with return on equity and return on capital employed at 17% and 48.5% respectively for FY15. Interest coverage ratio was at 5.7x for FY15 increased from 5.3x in FY14. Year end March Income statement ( million) Revenue 558.2 685.7 1027.5 % growth -4% 22.8% 49.8% EBITDA 177.9 214.0 281.2 % EBITDA margin 32% 31% 27% Depreciation and Amortization 19.3 21.0 29.9 EBIT 158.6 193.0 251.2 Interest 38.2 36.5 44.0 PBT 26.4 34.1 54.4 Tax 9.3 14.4 11.8 Net profit 17.1 19.7 42.6 % growth net profit -161.1% 45.8% 71.0% Balance sheet ( million) Shareholder fund 184.1 208.9 251.4 Long term liab 169.9 215.6 266.2 Current liab 248.9 408.9 244.8 Fixed assets 354.1 374.9 383.2 Current assets 249.0 459.0 379.6 Cash & cash equi 5.8 9.1 23.6 Cash flow statement Cash flow operations 55.3-1.5-2.5 Cash flow from investing -13.5-57.7-37.9 Cash flow from financing -29.5 62.5 5497.0 Per share data EPS ( ) 2.0 2.9 5.0 CEPS ( ) 6.5 (0.2) (0.3) DPS ( ) NA NA NA BVPS ( ) 21.6 24.6 29.6 Financial Ratios % ROE 9% 9% 17% ROCE 44.8% 45.5% 48.5% Debt/Equity 0.9 1.0 1.1 Interest coverage ratio 4.2 5.3 5.7 Current ratio 1.0 1.1 1.6 Cash ratio Source: Company, Karvy Investment Advisory 4
Financial Snapshot Revenue growth (%) EBITDA margin (%) 1,20 1,00 80 60 40 20 6% 4% 2% % -2% -4% -6% 30 25 20 15 10 5 34.0% 32.0% 3% 28.0% 26.0% 24.0% Revenue ( m) % growth EBITDA ( m) % EBITDA margin Net Profit Margin (%) BVS & EPS 5 4 3 2 1 Net Profit ( m) % net profit margin 5.0% 4.0% 3.0% 2.0% 1.0% % 4 3 2 1 Book value per share ( ) EPS diluted ( ) 6.0 5.0 4.0 3.0 2.0 1.0 Liquidity ratios Profitability ratios 2.0 1.5 6% 5% 4% 1.0 3% 0.5 2% 1% % Current ratio Cash ratio ROE ROCE Source: Company data and Karvy Investment Advisory 5
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