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Tuesday, March 6, 2018

Don't play it like the punters on street, you may lose money

When the stock market hits an all-time high, volatility, too, sees an unprecedented rise. Volatile sessions, with market swings both ways in intra-day trade, are now a routine.

India VIX, a gauge of market volatility often used by investors and traders to base their investment and trading strategy, has risen almost 40% in a year. The index shows magnitude of market fluctuation expected in the near term. It touched a 12-month high of 36 and a low of 12 - a three-time movement - in less than a year. And it is not a secret that individual investors abhor huge daily swings in market.

"These wild swings have become the norm since 2008. And it must be bothering some investors who base their 'buy or sell' decisions on the basis of market levels," says Suresh Sadagopan, principal planner, Ladder7 Financial Advisories, a wealth management firm.

"But regular investors are dismayed more by paltry returns they got in the last five years than daily volatility. Many are disappointed with the 3-4% annualised returns in the last five years," he adds.

Experts point out that most people erroneously place 'buy or sell' decisions on prevailing market conditions. Many believe it's a good time to book profits when the market is at an all-time high. Similarly, they wouldn't get into the market (despite experts highlighting the attractive valuations) now, because it is at a historical peak.

That is what makes experts like Sadagopan say that you should have a valid reason for your 'buy or sell' decisions rather than just the Sensex level or market volatility. "If you ask me whether there is a compelling reason to buy stocks now, the answer is no. But is there a reason to buy shares on a continuous basis, the answer is yes," says Sadgaopan.

Many investment consultants ask individual investors to stop tracking market benchmark on a daily basis. "When you track market every day, and trade short-term or play intra-day, good stocks get out of your hands. Retail investors are sure to lose money if they play the punters way. They must invest long term and not try to time the market," says Rajeev Thakkar, chief investment officer and director, PPFAS Mutual Fund.

"Retail investors must avoid taking daily stock tips from 'experts' as making money so fast is too good an idea to be true. It's because of people like punters that brokers make money and the market becomes volatile and hence, interesting," says Rajeev Thakkar. The strategy of investing today and exiting tomorrow only enriches brokers, feel experts. Rather, the buyand-hold strategy may reap dividends in the long run for investors.

Many wealth managers say investors shouldn't obsess themselves with daily movements as one can't do much about it. That is why they suggest regular monthly investment in equity. "We really don't know whether the market is going to stabilise any time soon. Or whether it will scale new high or low, for that matter.
All we know is that if you invest regularly through SIP, you will be able to accumulate more number of units at a lower cost. This will enhance your returns," says Suresh Sadagopan. Many experts say this is the only time-tested strategy available to individual investors to tame volatility over a longer period of time.

For selling investments or booking profits, financial planners say it is okay only if you have a compelling reason to do it. For example, if you need some money for travelling or paying insurance premium, you can book profits.

"Volatility is absolutely very high in the stock market. When to book profit depends on one's risk appetite. Investing in stocks is all about surplus money - money that you would not need, say in the next five years or may be, never. When the economy is growing by around 5%, deposits are giving returns of 10%, it's unrealistic to expect 100% returns in the stock market," says Gul Tekchandani, investment consultant.

"Whether to book profit early and exit depends on one's investment target: If one wants to hold, say for one's child, one ought to invest in predictable businesses and hold it for 20 years or so. But if some stock, bought on some 'tip' or hunch, is giving decent returns in, say, a month, one has to be stupid to not pull out," adds Gul Tekchandani.

Saturday, March 28, 2015

Dishman Pharmaceuticals - Good stock to invest in

CMP Rs160, Target Rs195
Time Span - Not meant for genuine investors :)

India CRAMS to benefit from wider customer base
Dishman has consciously changed strategy and widened its customer base for India CRAMS business which would account for ~23% of consolidated FY15E revenues. For instance, top 10 customers contribute 40% to revenues from 60-70% earlier due to new customer additions even as churn level remain low due to high switching costs in APIs. India order book stands at Rs2.8bn to be executed over the next five months and beyond that repeat orders and steady stream of new customers give us comfort on growth.
Another key driver of India CRAMS would be HIPO facility for oncology at Bavla, India where it currently has order book of US$25mn to be executed by August 2015; intermediaries for orders would be manufactured at its China facility (to derisk manufacturing at only one location) and final APIs to be exported from India. Current HIPO order book translates into 30-35% utilization rate and company plans to ramp up to US$200mn in next 12 months; HIPO facility APIs commands a lucrative 80% gross margin.  

Carbogen Amcis outlook remains robust
Carbogen Amcis, Dishman’s Switzerland based CRAMS business (~46% of FY15E revenues) saw EBIDTA margin decline in Q3 FY15 as the dispatch cycle got delayed due to seasonality in late December and customer preferences. Hence low margin development work related revenues were higher as compared to higher margin commercial sales. However, we expect the situation to normalize with recognition of high margin revenues in Q4. Carbogen has current order book of CHF110mn to be executed over next 1 year which augurs well for next year’s growth. 

Margin expansion, interest savings to drive ~29% EPS cagr
About 70% of Dishman portfolio is geared towards higher end API supplies with vitamin D3 and bulk drugs accounting for balance 30%. In vitamin D3, focus would be on quality rather than volumes which would protect EBIDTA margin. We expect interest cost savings (due to ~Rs1.2bn in FY16 debt repayment) and margin expansion of ~150bps to drive earnings cagr of ~29% over FY15-17; recommend BUY.

Financial summary
Y/e 31 Mar (Rs m)FY14FY15EFY16EFY17E
yoy growth (%)
Operating profit3,3213,3163,7224,175
OPM (%)24.022.623.424.0
Reported PAT1,0931,1381,4851,829
yoy growth (%)
EPS (Rs)13.514.118.422.7
P/E (x)
P/BV (x)
Debt/Equity (x)
ROE (%)
ROCE (%)12.111.312.613.7

Saturday, September 20, 2014

Get some portion of your investment in Pharma Space too - BUY LUPIN

We after a long time, once again back with the most fundamental stock tips for you all. The stock recommendations are for long term and serious investors only. You have to be stay invested for atleast 6 months to see the desired results. Long term investing is what gives you profit.


Lupin launched 19 new products in FY14, including generic versions of Zymaxid (antibiotic, October 2013), Trizivir (antiviral) and Cymbalta (anti depressant, December 2013) and in current fiscal, company plans to launch another 20+ products. Although Cymbalta pricing has descended largely to generic levels and Niaspan, launched in Q4 FY14, would see additional competition, we believe latter would be large enough opportunity to boost US growth in the current year. Other products like Doxycycline (anti-infective, March 2014) and Yaz (under launch process in the oral contraceptive portfolio) would also support growth. Lupin’s pending ANDAs imply an addressable opportunity of over US$80bn of which 30 are first-to-file (FTF) addressing a market size of ~US$14bn; it also has 15 exclusive FTF addressing a market size of US$1.5bn.

Overall we believe company’s existing US portfolio remains robust and growth would accrue from either price increases or additional market share gains. The recent consolidation in US distribution channels would have a mixed impact as in some cases the sheer scale of buying customers might entail price concessions while in others Lupin can gain additional volumes.

Chronic therapies to drive domestic formulations growth

India formulation business has recorded a robust 17% cagr over the last five years and the company is amongst the fastest growing players in high growth therapy segments like
Cardiology (23% revenue share), Anti-Diabetics (15%), Anti-Asthma (10%), Central Nervous System (CNS), Gynecology, Anti-Infective and Gastro-Intestinal (8%). The company has shifted from a dependence on acute therapies to the higher margin chronic therapy segments like CVS, CNS, anti-asthma etc which now account for 64% of domestic formulations’ revenues. In Q1 the momentum continued with revenue growth of 29% yoy compared to 9% yoy growth for the industry. We believe Lupin is well positioned to grow its relatively low market share of 2.8% (as of March 2014) supported by a portfolio of 21 brands with sales in excess of `300mn each. Company has launched 23 in-licensed products in the past four years of which 9 were first to be introduced in the domestic market.

Japan: large opportunity but steady revenues in near term

Japan is the 3rd most important market accounting for 10.4% of revenues after US and India. Japan generics offer a vast opportunity from both higher generics penetration (govt target of 60% vs current 44%) and patent expiries. Higher penetration would translates in to an additional 30-35% of the pharma volumes open to generics in the next 4 years while patent expiries of key molecules to the tune of US$17bn by 2017 would also add to the growth pool. I’rom (niche injectable player acquired in FY12 and 25% of Japan revenues) sales declined 4% yoy in Q1 (-6% yoy for FY14) due to fall in out-licensing business and company indicated in its

Kyowa, its other subsidiary, grew by JPY 14% in FY14 with a portfolio of 350 products. Although margins in Japanese business are below overall corporate level but company expect to sustain them. We factor in ~7-11% INR growth driven by Kyowa over the next 2-3 years. Lupin represents the best bet to play the robust growth in US generics expected over the next 2-3 years driven by new launches in FY14 and large opportunity size linked to pending ANDA approvals. Domestic formulations business with growth in high teens would easily outpace the industry supported by increasing share of chronic therapies and rise in market share. Margin profile would undergo a transformation from 23.5% in FY13 to >28% by FY17 with sustainable range seen at 28-30% according to the management. We forecast
19% EPS cagr over FY14-17 driven by 17% revenue cagr and ~160bps margin expansion and recommend BUY.