Caplin Point Laboratories Ltd - Solid prospects
Great past, exciting future outlook and available for a reasonable price
Company Overview
Caplin Point Laboratories Limited (Caplin) is a fully integrated, global pharmaceutical company from India.
Caplin is present across the pharmaceutical value chain right from APIs to Finished Formulations, R&D, Clinical Research, Contract Research Organization (CRO), Marketing & Distribution, online platform for Pharmacy Automation and building Key Starting Material (KSM) prior to the API stage.
Caplin is present across 23 countries with a dominant presence in Latin America (LATAM), Southern Africa and Francophone Africa along with a growing presence in United States of America and European region.
Caplin’s products span across Liquid & Lyophilized Vials, Pre-filled Syringes, Opthalmic dosages, Pre-mixed bags, Tablets, Dry Syrups, Liquid Syrups, Softgels, Liquid Injectables (Ampoules & Vials), Emulsion Injections (Ampoules & Vials), Capsules, Suppositories, Topicals and Sachets
Caplin has a manufacturing presence in India and China.
Share Details
NSE:CAPLIPOINT
Closing Price = 811.15 (15-Jun-23)
52 Week High = 856.8. Trading at 5% below 52 wk high
52 Week Low = 575. Trading at 41% above 52 wk low.
P/E = 16
Market Cap = 6,154 cr ( ~$ 750 million)
Quality: Returns on capital employed in cash
Caplin is a profitable and well managed company. While profit margins have been maintained, the ROE and ROCE have been falling. ROCE is getting depleted over the years and part of the reason is the cash balances.
Growth
While the quality of the company is not in question, the growth trajectory of the company is spectacular. Growth in the bottom line line has been better than the growth in the top line.
The top line growth is slowing down whereas PAT growth is stable. The management has guided for additional income of 230-260 crore for FY23-24 in the Q4 earnings call for FY22-23. The additional 230-260 crore of top-line in FY23-24 would translate into a 16-18% revenue growth over FY22-23. The components of the additional revenue are given as below
additional line of Softgel = 80-90 crores from LatAm markets for the current year.
brand marketing in Central America = of 30-40 crores
introduction of generic business in West Africa =10 crores
new initiatives in CIS and Southeast Asia = 20-25 crores
Caplin Steriles would generate an additional income of 90-100 crores
So FY24 would be around 16-18% and for FY25 and FY26 the growth is expected to be higher given the comment made by the management in its Q4-23 earnings call
See, we will continue to grow the way we have been growing and I would prefer to give actually good numbers, maybe starting from '25, '26,
The slide below confirms that the company is very efficient in execution. However, what caught my attention was its aspiration to build a Rs 1,000-1,500 crore cash surplus, confirming that the company is not only confident about its growth but also in its ability to make the growth profitable for itself.
So What????
If I own the stock, I will definitely hold on for the long term till the growth story plays out completely.
If I don’t own the stock, I would like to enter it. A company growing the top line at 24% CAGR and the bottom line at 32% CAGR quoting at a PE of 16 is worth buying into. I would like to dip build a position in the stock over a period of time and keep confirming if the management is on track to give good numbers starting from FY25, FY26
Disclaimer
It is an analysis of the company data and not a stock recommendation
My analysis can be completely wrong and can change the next minute based on changes in my understanding of the company
I look to own good companies at prices where there is a path to market beating returns over decades