There can’t be any entry price for these types of companies which are in its infancy. Because if they grow as expected then there stock prices can touch the sky as happened with Avanti and SKM Egg…and by the way when we are taking this much risk by investing in these unknown and small companies, we deserve hefty gains in the range of 10-20 times.
Titan Biotech is falling (or we can better say not rising as liquidity is very low even when it is falling) as its results for past 2 quarters aren’t that good with its turnover falling by some 10%...however the drop of water in the desert is its improving margins and lower raw material costs…its raw material cost is around 50% of turnover in last two quarters down from around 62% last year. We can’t gauge the reasons with surety due to lack of information provided by the company but It may be happening either because of fall in raw material prices, decline in trading activities, starting of production in its new factory.
Also last year, its turnover took a big leap to 40 cr from 28 in 2012-13 with export turnover doubling to 16 cr from 8 cr. So it is natural for it to remain stagnant for some time before finding new demand. Management is quite optimistic about the future of the company as they have also invested in new manufacturing facility, investing more money in the form of equity at a price of 60/- per share. Almost all of their products are linked with general health like protein powder etc which is quite different from pharma products…rising awareness and spending capability in the country will provide a boost to their products.
Entry barriers to their line of products are fairly high as apart from being sophisticated products, they need to take many approvals before launching new products. Also they have a varied list of users of their products which provides a cushion in case of slowdown in one particular segment of the economy.
So risk is high but reward can be pretty big…I’ll give it much longer time of around 2 years. Good dividend payout is one big indicator of promoter fairness in these small companies. So one can buy it around 32 and at every further fall…but with one condition…only invest your RISKY money (with which you can afford to take risk) not your NEED money.
(Views are personal and should not be taken as a recommendation for buying or selling a stock. Stock markets are inherently risky so kindly do your Due Diligence before investing)