Bilcare

Stock Eyes Major Gains As Co's Revenues & Margins Set To Touch 30%

 

BILCARE, Rs 1,000-crore supplier of technology-driven niche pharma solutions, looks a promising bet in the mid-cap space. This Pune-based company is a provider of packaging solutions and clinical trial supplies to over 500 pharma companies globally.

   The company, which has a manufacturing facilities in the UK, US, India and Singapore, has made significant investments towards expanding its footprint. It earns half of its revenues from its overseas business, which is growing at a faster rate than its domestic business. The company's revenues have grown at an average y-o-y rate of 22% over the past 12 months with an operating profit margin of 23%.

   The company raised around Rs 150 crore through a GDR issue in January this year. The funds were used to buy back the outstanding FCCBs leading to reduction in the company's debt-equity ratio from 0.7 from 1.9.

   With sales of generic drugs increasing globally, the company's largest business segment of pharma packaging is likely to log robust growth. Rising R&D leading to higher number of clinical trials is also a trigger for the company, which supplies research based products for clinical trials. Bilcare recently doubled its capacity of supplies for clinical trial services with the opening of a second unit in UK. Anti-counterfeiting solutions is another growth driver for the company, as it is being adopted by an increasing number of drug manufacturers to check counterfeiting of their products. Recently it launched a technology-based solution in the US to prevent counterfeiting of drugs.

   Bilcare's stock has, however, been an underperformer since the past two years. It has grossly under-performed the Sensex. It is trading at a consolidated price-to-earnings multiple of 10 and is valued at a market cap of Rs 1,100 crore — slightly higher than its consolidated annual revenues. These are fair valuations for a small-sized company. Going forward, Bilcare's consolidated revenues are likely to increase by around 30% annually with operating margins improving further to 30%+ levels. Considering the company's growth prospects and the stock's sustained underperformance on the bourses, there appears to be room for further appreciation in the company's stock price.