Stock Review: Bliss GVS Pharma

With Bliss GVS Pharma's growth strategy in place, long-term investors can consider buying this stock

MUMBAI-BASED Bliss GVS Pharma is a fastgrowing export-oriented company. As the 26-year-old company gets into an aggressive growth mode, it offers an attractive investment opportunity for investors.

BUSINESS: Incorporated in 1984, Bliss Chemical and Pharmaceuticals was primarily engaged in manufacturing of contraceptive vaginal pessaries — marketed under the brand name 'Today'. After the takeover of GVS Labs in September 2006, the company was renamed as Bliss GVS Pharma. From GVS Labs, the company acquired the competency to manufacture various dosage forms such as injectables, creams, gels, syrups, capsules, tablets and oral suspensions with focus on antimalarial formulations.

    During FY10, exports to unregulated markets contributed over 95% of the total revenues of the company. Bliss has a significant presence in most African markets through selling branded suppository dosages and anti-malarial formulations. In India, the company is the largest manufacturer of suppositories and pessaries — selling them under its own brands as well as manufacturing them for other pharma companies.

GROWTH OPPORTUNITIES: The company has been ramping up its manufacturing capacities to cater to the increasing demand for suppositories. Its new plant in Thane, meant for production of suppositories, will be fully commercialised by September 2011.

    The company has planned a capex of 35-40 crore in FY11 and FY12, respectively. It intends to commission an R&D centre this fiscal year. It is also considering newer opportunities in manufacturing steroidal suppositories, ointments and tablets in the next fiscal year.

    On the marketing front, the company is looking at entering regulated markets. In India, it intends to revive its brand 'Today' by beefing up local advertising for the brand. Besides, it also intends to introduce more branded generics under the anti-malarial therapy in the local market. Towards this, it has invested to increase its field force in the country.

    Over the next five years, the company's management plans to set up four additional factories internationally through joint ventures or technology transfers with one client in gulf country and three others in the African countries.

FINANCIALS: Since the merger between Bliss and GVS, the combined entity has grown at a faster pace. From 5.6 crore in FY06, the company's net sales have grown to 168.9 crore in FY10. The net profit has grown from 1 crore to 41.7 crore during the same period. The company has been consistently paying dividend since FY06 with an average dividend payout of 6.2% (in the last three years). The company has operating margin of over 30%, which is relatively higher for a typical formulations company. The management expects to maintain these margins due to its first mover advantage in the emerging markets and its attempts to foray into the regulated markets. The company's revenues are growing at over 25-30% since the past two years. The management expects to maintain similar rate of growth in future too.

 

VALUATIONS: At a market cap of 375 crore, the company is valued at one-and-half times its past 12 months turnover of 200 crore. Its stock is trading at 7.5 times its earnings. While these are fair valuations for a small-sized company such as Bliss, they still have potential to increase further since most growth-oriented pharma companies are valued at over twice their revenues. With its growth strategy in place, investors can consider this company with a long-term horizon.