SP Tulsian of sptulsian.com asks traders to keep a view of about six months and look for a target of Rs 500 on Torrent Pharmaceuticals. He expects Indraprastha Medical Corporation, which is now ruling at around Rs 33, to move to Rs 40 maybe in six months or so.
SP Tulsian of sptulsian.com is bullish on Torrent Pharmaceuticals and Indraprastha Medical Corporation. He expects Torrent Pharma and Indraprastha Medical to post earnings per share (EPS) of Rs 40 and Rs 4.50 respectively for the current year. He also says Indraprastha Medical has 52 specialties or services available under one roof, which is not available anywhere in the country.
On Torrent Pharmaceuticals
This company posted their first quarter numbers on Friday and the numbers have been very good. You see a growth of about more than 20 percent on topline and bottomline. The company has three plants in India. It has a very good presence worldwide. They have a unit in Brazil, US and in Germany. So the company is catering to Europe, Latin America and American markets.
In fact, the global operations of the company are contributing about 57 percent to the topline. It has a topline of close to Rs 970 crore for Q1 of which 57 percent has come from these three units and that has been the case for the company for quite some time. The international operations have given them a compounded annual growth rate (CAGR) of 25 percent on the topline and bottomline. Torrent Pharmaceuticals hopes to continue the same. It expects to perform their global operations well. Though on the consolidated basis, it has a topline growth of about 22-23 percent but the bottomline is giving them a growth of more than 20 percent.
The international operations have been helping the company to do so. For Q1 they had a topline of Rs 970 crore with profit after tax (PAT) of Rs 150 crore. The company had issued last year - that is maybe the ex-bonus has gone a month back 1:1 bonus and because of that the equity has increased to Rs 80 crore.
If you see now the earnings per share (EPS) of expanded equity base of Rs 80 for Q1 has been close to about Rs 9, which was at Rs 25 for FY13 if I adjust on ex-bonus. So taking this into consideration, the company should be able to post an EPS of close to about more than Rs 40 for the current year i.e. FY14, promoter stake is a good 72 percent.
The distribution policy of the company has been very good. In fact last year Torrent Pharmaceuticals had given a dividend of Rs 23 on face value of Rs 5, which included a special dividend of Rs 10. So even if you take a dividend of Rs 13 on the share on a face value of Rs 5 that also indicates a very good distribution policy and we all know that if you have a good pharmaceutical stock in the place where there are no concerns on policy issues or maybe the issues like FDA.
So this stock looks quite good, in fact when the company issued their proposed bonus about three months back, stock moved to a high of maybe on ex-bonus adjustment at about Rs 450-460. The stock has corrected now in these last two-three days. So if somebody can keep a view of about six months, they can look for a target of Rs 500.
On Indraprastha Medical Corporation
This is a very interesting story. The company has been gradually improving. This is a joint venture or maybe a public-private partnership (PPP) project where 26 percent is held by the government of India and 25 percent is held by Apollo Hospital. Again 700 beds hospital in Delhi which is one of the largest hospitals in the country and they have the capacity to expand to 1,000 beds as well.
If I go by their earnings, the Q1 EPS has been at about more than Re 1 and FY14 should be able to give them an EPS of close to Rs 4.50 because the company though not improving so much on the topline because of the bad constraint, they are in the process of raising the bed capacity from 700 to 1,000, but their margins have been improving. They have 52 specialties or services available under one roof, which is not available anywhere practically in the country. So that is the advantage with them.
If you take the EPS of Rs 4.50, even the dividend distribution has been 16 percent for FY13. So the company which is now ruling at around Rs 33 can move to a level of about Rs 40 maybe in six months or so.
Disclosure: SP Tulsian has no holding or interest in both the stocks.