Venus Remedies

Investors looking at bottom-fishing in the small-cap space can consider Venus Remedies

 

AMONG the under-valued stocks in the smallcap pharma space, Venus Remedies appears to be an attractive bet. Forming part of the ETIG's fastest-growing small companies, Venus Remedies has been growing steadily in the past couple of years. The company's growth plans and the steadily improving performance are likely to boost the company in the future.

BUSINESS:

Chandigarh based Venus Remedies is a major producer of oncological and cephalosporine injectable products. The company has derisked its business model by having presence in the high growth therapeutic segments such as anti-infective, oncology, cardiology and neurology.

   The company follows the strategy of forging marketing tie-ups with companies in India and abroad for specialty products. The company is also looking at contract manufacturing opportunities. It has filed many international patents for sophisticated formulations of anti-biotics and oncological therapeutics.

   Last week, Venus launched world's first once-a-day painkiller injectable in India. The company hopes to capture 10% market share in the early years of its launch and is already in talks with global pharma companies for out-licensing the product. In March 2010, the company got Indian patent for one of its product Sulbactomax and has also filed patent for this product in another 50 countries including the US, Europe, Australia, Japan and Latin American countries.

GROWTH STRATEGY :

Registrations approved in 19 semi-regulated markets in 2008-09 are expected to drive the company's prospects and profitability. Its launch of innovative products in India and other international geographies (through marketing alliances) will strengthen revenues. Contract manufacturing opportunities with leading global brands are expected to yield attractive results. In-licensing initiatives are likely to reinforce our performance.

FINANCIALS:

The company's net sales have grown at a compound annual growth rate (CAGR) of 55% over the past five years to Rs 310 crore in FY10. The net profits have grown at a CAGR of 62% to Rs 45 crore in FY10. The company has undergone a capex of Rs 200 crore over the past five years.

   It has logged a strong performance for the first quarter ended March 2010. With 27% increase in net sales and 31% increase in net profit, the company has logged an improved
performance sequentially.

VALUATIONS:

The company has outperformed the Sensex and is currently valued at little over than its annual turnover. The stock is trading at a price-to-earnings multiple of 5. These relatively lower valuations indicate the scope for the company's stock to appreciate further as company continues to deliver growth. Investors looking at bottom fishing in the small-cap space can consider this scrip.