Ashika Research - Equities

Albert David Ltd.

November 29, 2014

Company Description
Albert David Ltd (ADL) is a Kolkata based pharmaceutical
company.
The
Company
manufactures
pharmaceutical
formulations and bulk drugs in its Kolkata manufacturing unit;
infusion solutions and oral solids at Ghaziabad factory;
disposable syringes and needles at Mandideep plant, and herbal

Buy

Closing price

Rs. 256

Target price

Rs. 363

Potential upside

42%

Company Information

formulations at the Bangalore unit. The Company exports these

products to Southeast Asia, Africa, the Middle East, Europe, the

BSE Code

524075

NSE Code

Not Listed

United States, and Latin America. The companys flagship product

is Placentrex which is derived from the extract of human

Bloomberg Code
ISIN

placenta and is used in treating Pelvic Inflammatory Disease

(PID), wound healing and tissue regeneration. The company also

Market Cap (Rs. Cr)

has branded products in Laxative, Vitamins, Anti-Oxidants and

Herbal segments.

52-wk Hi/Lo (Rs.)

ALBRT IN
INE155C01010
139.03

Outstanding shares(Cr)

0.6
256.0 / 100.0

Avg. daily volume (1yr. on NSE)

Face Value(Rs.)

Investment Rationale
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Recommendation

Book Value

Robust Quarterly Result

12272
10
158.2

Relative performance chart (one year)

The company has posted a strong result for Q2FY15 with sales
increasing by 10.3% YoY to Rs. 292.3 cr. due to higher volume.
Operating profit of the company grew by 22.6% to Rs. 31.4 cr.
due to lower raw material expense and other expense. The
company showed 46.8% YoY growth in its Net Profit from Rs. 8.6
cr to Rs. 12.6 cr due to lower depreciation and tax expenses. The
companys operating profit margin increased by 108bps to
10.7% and net profit margin by 107bps to 4.3%. Given high
growth in pharma sector, we expect ADL will be able to sustain
such growth in the coming future.

Strong financials & healthy return ratios

Over the years ADL has posted strong financial growth on
account of good business model. Sales have grown at a CAGR of
10% during FY10- FY14, while PAT has grown at a CAGR of 8%
during same period. The company also has strong balance sheet
with cash and cash equivalent of ~ Rs.26.5 cr. with strong
operating cash flow which enabled the company to maintain
In Rs. Cr.
Net Sales

FY13

FY14

FY15E

FY16E

265.07

292.27

328.67

369.60

Growth (%)

15%

10%

12%

12%

EBITDA

26.3

31.4

36.30

41.96

9.92%

10.74%

11.04%

11.35%

8.6

12.6

16.1

20.7

3.23%

4.30%

4.91%

5.60%

15.00

22.03

28.26

36.27

EBITDA Margin (%)

Net Profit
PAT Margin (%)
EPS (Rs)

Source: Ashika Research

1008, Raheja Centre, 214, Nariman Point, Mumbai-400 021, Ph- 022 6611 1700, Extn. - 704 www.ashikagroup.com

Ashika Research - Equities

Investment Rationale Cont

gearing ratio at ~0.4x. ADL has also delivered strong return ratios to its shareholders
with RoNW of 17.5% as of FY14. Besides, company has good track record of rewarding
its shareholders with dividend payout ratio at 25%. Given, the strong growth
momentum in pharma sector, it is expected that ADL would be able to sustain such
growth momentum.

Strong focus in R&D Expenditure

Unlike other industries, there is fast product obsoletion in Pharma industry. Therefore,
the product portfolio is a dynamic one and requires continuous strengthening with new
developments. Ever changing regulatory requirements calls for back up of database
with Quality Assurance. Companies are making more and more investments in R&D not
only to support the changing regulatory requirements but also to remain afloat with
continuous flow of products developed at R&D. The Companys Research &
Development Unit at Kolkata has been recognized by Department of Scientific and
Industrial Research (DSIR), Government of India. The Research & Development Section

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of the company has been engaged in developing innovative process developments,

analytical methods and process validations. It has also been working on development of
new products. To expand the geographical reach of their products in export market
numbers of dossiers have been submitted in different countries. Approval of some
dossiers has been received. Past two financial year company has expended Rs. 945.21
lakhs towards its R&D.

Flagship Product
Placentrex is one of the core products for ADL, which is used to treat pelvic
inflammation and wounds and is manufactured from human placental extract. The
company product portfolio comprises brands like Evict (laxative), Sioplex (vitamin),
Siooxy (anti-oxidant) and herbal products. Major part of companys business relates to
formulation segment. Regarding geographical segment, export sales constitute less
than 10% of the total sales of the company. Large Volume Injectibles constitutes 33%
of sales followed by Liquids that constitutes 15% of sales.

Credit Profile
CRISIL Limited has affirmed [CRISIL A2+] (pronounced as CRISIL A Two Plus) in respect
of Short Term rating and [CRISIL A-] (pronounced as CRISIL A Minus/Stable) in respect of
Long Term rating. This rating indicates strong degree of safety regarding timely
payment of financial obligations. Such instruments carry low credit risk.

Key Risks

The Indian Pharmaceutical market is highly fragmented and as more players enter
in the industry, the landscape is becoming increasingly competitive. Certain
brands and therapy segments are facing stiff competition.

Rising cost and falling margins are areas of concern.

The adherence to regulatory compliance and standards is becoming tougher.

1008, Raheja Centre, 214, Nariman Point, Mumbai-400 021, Ph- 022 6611 1700, Extn. - 704 www.ashikagroup.com

Ashika Research - Equities

Outlook & Valuation

Albert David Ltd. is one of the oldest pharmaceutical companies in India and derives
close to 90% of their revenues through sale of formulations, infusions, herbal dosage,
etc. The company is the only manufacturer of human placental extract in India. The
company has a history of consistent dividend payments with five year average payout
near 29%. Besides, the company is not leveraged with debt equity ratio at 0.47 in FY14.
Moreover, the company has invested in fixed capital over the years, thus signifying the
company is still in expansion mode. The company has comfortable working capital days,
thus resulting in strong operating cash flows. On the valuation front, the scrip is trading
at P/E multiple of 7.0x of FY16E EPS of Rs. 36.27 and investors are advised to BUY the

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scrip with a target price of Rs. 363 from 12 months investment perspective.

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1008, Raheja Centre, 214, Nariman Point, Mumbai-400 021, Ph- 022 6611 1700, Extn. - 704 www.ashikagroup.com