Piramal Healthcare, in their Analyst presentation came out with their future strategy of utilizing their cash. As mentioned in my earlier post, they are sitting on almost Rs 10,000 crore cash/cash equivalent. With the sale of the Domestic Formulations business, there was some anxiety as to which business would Mr Piramal decide to invest the money in.
The major focus of the investments lies in four areas as follows:
1) Pharma Solutions
Investment: Rs 2,700 Crore
Current Sales: Rs 1020 Crore
Sales Target: Rs 5,000 Crore by 2016 (CAGR of 37%)
They aim to be among the top-3 contract manufacturing organizations globally.
2) Critical Care
Investments: Rs 1500 Crore
Current Sales: Rs 388 Crore
Sales Target: Rs 2,000 Crore by 2016 (CAGR of 39%)
They aim to be among the top-2 anesthetic companies globally.
3) OTC
Investments: Rs 2,500 Crore
Current Sales: Rs 125 Crore
Sales Target: Rs 1000 Crore by 2016 (CAGR of 52%)
Among top 3 companies in India by 2016 (Currently in to 10)
4) Life Sciences
Investments: Rs 600 Crore
Current Sales: (Yet to be merged into PHL)
Sales Target: (High potential, they hope to launch their first drug (for cancer) by 2014)
Over and above this, they will be investing heavily in PHL Capital. The money left out will be used to invest in minority stake investments.
The growth they are targeting would be achieved through a combination of organic and inorganic route. With the monetary power of going forward towards this target, PHL seems to be poised for a high growth trajectory.
In the Analyst Presentation they set a sales target of Rs 10,000 Crore for FY2016. Based upon that and the other information that has been posted here, I have made some earnings estimates for PHL.
So, if we consider a P/E ratio of 20, the price by the end of 2016 could reach around Rs 1662. This is a relatively conservative estimate, given the P/E multiple of the current top 5 market cap pharmaceutical companies is well above 20 (With that of Sun Pharma being close to 37).
The major focus of the investments lies in four areas as follows:
1) Pharma Solutions
Investment: Rs 2,700 Crore
Current Sales: Rs 1020 Crore
Sales Target: Rs 5,000 Crore by 2016 (CAGR of 37%)
They aim to be among the top-3 contract manufacturing organizations globally.
2) Critical Care
Investments: Rs 1500 Crore
Current Sales: Rs 388 Crore
Sales Target: Rs 2,000 Crore by 2016 (CAGR of 39%)
They aim to be among the top-2 anesthetic companies globally.
3) OTC
Investments: Rs 2,500 Crore
Current Sales: Rs 125 Crore
Sales Target: Rs 1000 Crore by 2016 (CAGR of 52%)
Among top 3 companies in India by 2016 (Currently in to 10)
4) Life Sciences
Investments: Rs 600 Crore
Current Sales: (Yet to be merged into PHL)
Sales Target: (High potential, they hope to launch their first drug (for cancer) by 2014)
Over and above this, they will be investing heavily in PHL Capital. The money left out will be used to invest in minority stake investments.
The growth they are targeting would be achieved through a combination of organic and inorganic route. With the monetary power of going forward towards this target, PHL seems to be poised for a high growth trajectory.
In the Analyst Presentation they set a sales target of Rs 10,000 Crore for FY2016. Based upon that and the other information that has been posted here, I have made some earnings estimates for PHL.
So, if we consider a P/E ratio of 20, the price by the end of 2016 could reach around Rs 1662. This is a relatively conservative estimate, given the P/E multiple of the current top 5 market cap pharmaceutical companies is well above 20 (With that of Sun Pharma being close to 37).
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