Buy Caplin Point Laboratories Ltd For Target Rs.1135 - ICICI Direct
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Strong Q1 with steady margins…
About the stock: Caplin derives entire revenues through exports with 92% of revenues from Emerging Markets (LatAm + Africa) where it has an end-to-end business model through last mile logistical solutions for its exclusive distributors.
* In the US, Caplin has filed 20 ANDAs on its own and with partners with 15 approvals from the USFDA (five with partners).
* For LatAm markets, it outsources ~40% of products from China, ~20% from Indian vendors and in-house manufacturing of the remaining ~40%.
Q1FY22 Results: Caplin reported robust Q1FY22 results.
* Sales were up 25.1% YoY to | 300.4 crore
* EBITDA in Q1FY22 was at | 92.6 crore, up 29.3% YoY with margins at 30%
* Consequent adjusted PAT was at | 70.9 crore (up 29.9% YoY)
What should investors do?
Caplin’s share price has grown by ~3.8x over the past five years (from ~| 231 in July 2016 to ~| 884 levels in July 2021).
* We maintain our BUY rating on the stock due to visible growth in the medium to long term
Target Price and Valuation: We value Caplin at | 1135 i.e. 24x P/E on FY23E EPS.
Key triggers for future price performance:
* By thriving in lesser known CA markets and cracking the US generic pharma code of injectable, the company has created its own identity with long drawn plans on the back of significant capex
* Portfolio comprises 20 filed ANDAs, of which 15 have been approved. The company also has 45+ products in the pipeline
* Growth momentum to persist mainly due to further expansion in front end, increasing product basket, change in product mix, launching of own brands.
Alternate Stock Idea: Apart from Caplin, in healthcare coverage we like Aurobindo.
* It is a vertically-integrated pharmaceutical formulations manufacturer. It has 14 formulation and 11 API manufacturing facilities with 90% revenue coming from international operations
* BUY with a target price of | 1165
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