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.
Regards
Gurpreet Singh.
(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)
Great analysis.........
ReplyDeleteSir , r u see any future on AJANTA SOYA, pls give ur suggestion
ReplyDeleteDear Sir, can't say about this as i have never studied it...but it just looks quite ordinary...it belongs to low margin commodity play of soya oil business. There are much better opportunities in the market...avoid.
DeleteThank u sir
ReplyDeleteDear Gurpreet sir,
ReplyDeleteGood day.
This is Kumar, Engineer by profession, newbie in markets - investing since last 6-8 months. Not here to make quick bucks but just want to make my hard earned money work for me.
--
I stumbled upon Titan Bio-tech while researching for multibagger stocks. In first glance thought this was another small cap with manipulative promoters, no real value in products, etc (e.g., Pochiraju Industries, Shree Hari Chemicals, etc - burnt my hands here) but two things took me by surprise about this company, promoters subscribing shares at 60/- when CMP is less than half of it. Their willingness to share profits with investors in the form of dividends.
Company focus on R&D is reflected in their product pipleline which is diverse and addresses specific needs of Agro/Food/Pharma/etc.
I wasn't fully conviced with my study, so I googled and found your blog. It made me really happy (and built confidence in me that I'm on right path) to see someone who discovered SKM Egg and Avanti feeds in their days is also betting on Titan Biotech. I'm planning to take positions now and with cmp of 28/- it is just icing on the cake.
Before I buy, I wanted to get your opinion on Titan Biotech's performance for FY '15. (Topline was pretty much muted but only light is OPM increased from 6% to 7.5%.)
--
I also noticed you were tracking Biocon and wanted to bring to your attention a company from same domain. That is, Krebs Biochemicals and Industries.
IPCA recently increased its stake to 30% (at rs 54/- per share when market price was around 35) and Ranbaxy holds around 11%. Interest of two major pharma tells a lot about potential of Krebs.
One of their plants is US FDA approved. Both plants should be back into operations by Q1 FY '16 (they were closed for whole of last year).
They are very few player with capabilities in Fermentation, Biocatalysis and Organic Synthesis
Request your views on Krebs as well.
--
Thanks for taking time going over my post. Its greatly appreciated :)
Kumar
kumar..apart from the stake buy of biocon and ipca ..what are the triggers that you see for kreb growth?
ReplyDeleteHi sir,
DeleteInterest of 2 major pharma's (IPCA and now Sun) in itself is a major confidence booster for small investors like us.
They are into fermentation, chemical synthesis and enzymatic bio chemical processes which are hard to replicate and makes among few players.
Biocon ltd. is probably the only other player in India.
Their Unit-2 produces Lovastatin and Simvastatin which was major revenue generator for it in the past. Not many players have capability to produce
these (Cipla, Orchid, Aurobindo pharma are only few I know.)
Their Unit-1 is US FDA approved and I'm sure IPCA and plan to use to produce Ephedrine/Pseudo ephedrine and export the same. Contract manufacturing is also done in this plant. FDA approval and IPCA control will attract interest from other major pharma players who are not into this niche field (e.g. SUN Pharma).
Promoters rich experience in this field and their infrastructure are assets for the company. Promoters will be going for pref allotment soon and pump in money for working capital which shows renewed interest from them to bring back the company to its glory.
This is still a risky bet and depends a lot on ifs in future. If you plan to buy you may wait for Q2 results to see if it is headed in the right direction. Note that its valuation jumped from less than 30cr to over 135cr while generating almost zero revenue. And it has pretty much sustained those levels. This may mean its overvalued now yes but also that investors are willing pay higher for this company as its in niche field.
Thanks.
Great analysis Dear Pawan. Just that day i noticed that i missed your earlier query on Krebs although i have never studied it.
DeleteThanks Gurpreet sir and not a problem with missing the query. I was fairly convinced about it then and holding from 72/- but I understand its risky nature. I try to keep updated everyday on these risky bets and would immediately sell it if turnaround is not unfolding as expected. Thanks.
DeleteVeerudu sir,
DeleteI missed a couple of points here. I'm adding those...
They have significant production capacity. Unit-1, Unit-2 when operating at full capacity can generate about 200-300cr sales. Of course they need to first get enough orders for this. If we closely see that has not been a problem for Krebs in the past, but employee worker strikes, debt, etc i.e. internal issues were the problems.
The reason I suggested to wait for Q2 results is because by Apr'15 end both their units were operational. May and June it was mostly trial runs, so we need to see how they do in Q2.
Thanks.