At the lower price band of Rs 140 per equity share of Rs 10 face value, the P/E works out to 61.8 times the EPS of Rs 2.3 (on post-IPO equity) for FY 2015. At the upper band of Rs 145, P/E works out to 64.2 times the EPS of Rs 2.3 (on post-IPO equity) for FY 2015. Comparable companies such as Hatsun Agro Product and Heritage Foods are trading at 115.2x and 29.4x P/E on the annualized EPS for FY2015. Such high valuations are unsustainable in the medium-to-long term.
You are forgetting the fact that the earnings and revenue growth rate for Prabhat is far higher than for Hatsun and Heritage and thus based on a reasonable estimate of earning for FY16 based on interest savings and mega project benefit...the pricing is at a major discount to Hatsun / Heritage.
Interesting point in ET today as regards valuation. Per ET estimated FY16 PE is 27x, which is quite reasonable.
Further, given most of IPO proceed is for debt reduction, in terms of interest cost the savings would be at least 25cr, which most post tax flow straight to bottom line. This, and hopefully if company grows per historic trend might make it interesting.
Thoughts? Was interested as this is only non-industrial consumer IPOs after Manpasand.
Net sales grew 35% to Rs 500.30 crore and operating profit (OP) was lower by 340 basis points, restricting the OP growth to 28% to Rs 308.83 crore in FY 2015. Other income was up 29% to Rs 27.75 crore and profit before interest, depreciation and tax 28% to Rs 336.58 crore. After increasing provision of interest 48% to Rs 525.92 crore and depreciation 54% to Rs 140.61 crore, loss at the profit before tax level stood at Rs 329.95 crore. After providing for total tax of Rs 2 lakh and minority interest and share from associates at Rs 28.41 crore, loss at the profit after tax level stood at Rs 301.56 crore.
Post-issue equity share capital at the higher price band of Rs 103 stands at Rs 352.26 crore of face value of Rs 10 each. Due losses, there is no EPS. The book value (BV) pre-IPO on the existing equity share capital of Rs 310.96 crore stands at Rs 23.5. Post IPO, the BV on equity share capital of Rs 352.26 crore stands at Rs 32.8. At the higher price band of Rs 103, the issue is offered at 3.1 times BV. IL&FS Transportation, which is in similar business and had consolidated BV of Rs 217 end March 2015, is trading at 0.4 times consolidated BV.
For FY 2015, net sales (excluding the trading business) grew 14% to Rs 328.76 crore. OP was down 4% to Rs 119.59 crore. Other income was down 90% to Rs 2.15 crore. There was forex gain of Rs 17 crore in FY 2014 (shown in other income) compared with forex loss of Rs 14.34 crore (shown in other expenditure) in FY 2015. The company took an FCNR loan against call options to interest costs, which resulted in forex adjustments.
After providing interest and depreciation of Rs 26.37 crore and Rs 33.04 crore, down 20% and up 17%, respectively, PBT was lower 19% to Rs 80.16 crore. After providing for tax of Rs 7.02 crore (MAT credits being taken), down 21%, PAT stood at Rs 73.14 crore in FY 2015, down by 19% over FY 2014. On post-issue equity share capital of Rs 142.60 crore of face value of Rs 10 each, EPS works out to Rs 5.1.
At the higher price band of Rs 155, the issue is offered at a P/E of 30.2 times. Among the listed companies, Gateway Distriparks, Allcargo Logistics, Container Corporation look comparable with Navkar Corporation. Gateway Distriparks, at the current market price of Rs 353, is trading at P/E of 20.4 times its FY 2015 consolidated earnings. Allcargo Logistics, at the current market price of Rs 332, is trading at P/E of 17.5 times its FY 2015 consolidated earnings. Container Corporation (the largest player), at the current market price of Rs 1636, is trading at P/E of 30.4 times its FY 2015 consolidated earnings. Given the limited track record of the promoters and the company and given the fact that the growth from existing facilities has reached its peak and further growth will take some time before capacities come on stream, the issue is steeply priced.
Below are the three reasons why Sharekhan is bullish on the Navkar Corporation public offer.
1) NCL at the upper price band is likely to trade at price-to-earnings ratio (P/E) and EV/EBITDA of 23.2 and 6.2, respectively, its 2014-2015 earnings. As compared with the large players like Container Corporation of India and Gateway Distriparks, the return ratios are lower as these players enjoy premium positioning due to economies of scale.
2) The brokerage hobelieves the company’s expansion plans which are likely to be materialised in the next financial year will significantly increase its capacity and lead to higher earnings.
3) Further, the logistics sector has been in the limelight on account of proposed dedicated freight corridors, Goods and Services Tax (GST) policy and huge investments in the sector.
Consequently, considering the company’s line of business and growth strategy Sharekhan has a positive view on the company.
1. Syngene International started operations in 1993 providing contract research in chemistry and biology. It now has discovery and development service offerings across small and large molecules, DNA molecules and antibody-drug conjugates.
2. Kiran Mazumdar-Shaw is the founder of Syngene. The company was first established as a private limited company in 1993 and became a public limited entity in 2007. In 2002, 99.9% of its equity shares were transferred to Biocon Ltd, making it a subsidiary of the company.
3. Silver Leaf Oak Advisors has held a 10% stake in the company since 2014.
4. Bristol Myers Squibb, Abbott Laboratories (Singapore) Pte. Ltd and Baxter International Inc. are three of its major clients. It also has smaller clients such as Achillion Pharmaceuticals Inc., Aquinox Pharmaceuticals Inc. and Saniona AB. The total count of clients as of March this year was 221, only 5% of whom are based in India.
5. Seventy percent of its revenue comes from the top 10 clients. Bristol Myers Squibb alone contributes 30%. These clients have long-term contracts.
6. It has 400 scientists working exclusively for Bristol Myers Squibb. It also has 150 scientists for Baxter and 30 scientists for Abbott.
7. Syngene has 900,000 sq. ft of work space in Bengaluru and is also in the process of setting up a 200,000 sq. ft research centre and a manufacturing facility.
8. The contract research provider has 2,685 employees, of whom 2,122 are scientists, with an average age of less than 28 years. 24% of revenue, or Rs.200 crore, went toward employee benefits in the year ended March.
9. Syngene has so far developed monoclonal antibodies, glycoproteins, complex proteins, conjugated proteins in E. coli and Chinese hamster ovary cells.
10. Clinigene is the clinical trials subsidiary of Syngene, which accounts for less than 10% of its revenue.
Dont sell Syngene.. keep for long term ! It deserves scarcity premium.
Here is brand new motilal oswal report on that -
Initiating Coverage Buy Rs. 285
We recommend a BUY on Syngene International with a target of INR 350- valuing the company at 25x FY 17E EPS.
Unique CRO play: Syngene, subsidiary of Biocon, is a contract research organisations (CRO) with 2000+ scientists working for 16 of the top -20 global innovators. Syngene offers integrated discovery and development services to over 211 clients globally (103 in CY12) in pharma, biotech, agrochemical and other industries. Long-standing relationships with customers have been a key strength. Some of its strategic collaborations are with Bristol - Myers Squibb, Baxter, Endo Pharmaceuticals (pharma), and Abbott Nutrition.
Valuations & View: We recommend buying Syngene post the listing for a target price of INR 350 per share. We value the company at 25x FY17E EPS at a premium to its only comparable peer in Asia. Wuxi Pharmatech (the only comparable peer in Asia) is valued at ~20x FY17E EPS. However, Syngene has superior financials compared to Wuxi with FY15 margin of 33.0% (vs. Wuxi''s 22.3%), ROCE of 21% (vs 10.5%) and ROE of 20.7% (vs 15.2). The novel drug CMO opportunity, could result in earnings surprise to our estimates in FY17. Further, as there are no other listed players in bio-pharm CRAMS space, we believe Syngene will command a scarcity premium.