Analysis of Parabolic Drugs Ltd

Introduction

[Based upon Company Website]
Parabolic Drugs Limited is one of the fast growing API (Active Pharmaceutical Ingredients) and API intermediate manufacturing and marketing company in the SME segment, with increasing international presence and a strong R&D foundation, based at Chandigarh, India.

Commissioned in 1998, PDL has two fully functional, state of the art manufacturing units, a WHO-GMP certified Unit based in Derabassi (Punjab) and a world class Semi Synthetic Penicillin manufacturing plant at Panchkula, (Haryana) with one of its products been approved for sales to USA, respectively. With Presence in over 45 countries, Parabolic Drugs Ltd emerges as one of the fastest growing Pharma Company.

PDL has a dedicated Custom Synthesis and Research & development Centre at Barwala (Haryana), fully equipped with latest analytical facilities and backed up with cGMP pilot plant for scale up of technologies and filing of DMFs.

Financial

PDL registered a modest growth of sales in Q2 FY11, as against that in the previous fiscal. Sales grew from Rs 128.84 Cr to Rs 147.45 Cr. On the other hand, the Net profit registered a tremendous growth from Rs 5.42 Cr to Rs 14.29 Cr. Operating profit margins have increased in this period. Equity capital has changed in the same period from Rs 10.75 Cr to Rs 61.89 Cr, thereby, direct comparison of EPS is not logical.

It should be noted that Q4 results of previous fiscal (FY10) showed a sales of Rs 167.76 Cr, which indicates a lower sales in the last quarter, but the positive indicator is, although sales have fallen, the profits have increased from Rs 11.52 Cr.

For the first half of this fiscal, sales stands at Rs 275.25 Cr as against Rs 233.42 Cr. The profits have also increased from Rs 13.15 Cr to Rs 24.82 Cr - a growth of 89%. The improving margins are a good indicator of the hopefully good performance by the company in the future.

EPS for the H1 of this fiscal stood at Rs 4.93, which take the annualised current EPS of the stock to Rs 9.86. The stock is currently trading at Rs 57, at a current PE multiple of 5.78, which is way below the industry average of 26.

The book value per share of the company stands at Rs 32.5. Thus, the stock trades at twice the book value, as against a higher Price per Book Value for peers ( Lupin - 8.23, Aurobindo Pharma - 3.89).

The long term debt equity ratio is 1.02, down from 1.21, which is good for a growing company. Total debt to equity has also fallen from 2.89 to 2.65. Current ratio has increased in the same period from 3.06 to 4.26. Cash flow to total debt ratio is at 10.52, which shows the financial stability of the company (Ability to pay debt through cash flows generated).

FIIs hold 16% in the company and the DIIs another 15%. The IPO of the company had listed at Rs 75 (lower band) in June this year. The company has a current market Capitalisation of Rs 350 Cr.

Recommendation

We can Invest into the company keeping a long term view.