Buy Piramal Healthcare: Target 496 :: Anand Rathi

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It is rare to rarest case when one gets the opportunity to buy a business at 17-18% discount of Net current assets value.  

     Piramal Healthcare                                                                           CMP    366                                                                   Target    496  

Company Description

Piramal Healthcare Limited, a primal group healthcare company established in 1988, engaged in manufacturing and Marketing of bulk drugs and formulations across the world. With the diversified portfolio across 14 therapeutics area, company was the fourth largest domestic healthcare company in FY10, before selling of its domestic formulations business to Abbott.

Company now has critical care and OTC division under its portfolio. Primal in FY11 bought I-pill the leading OC brand in India from Cipla.

Investment rationale

~ Market cap is below net current assets – Ample Margin of Safety

~ Growth of Existing Business

~ Financial Investment in Vodafone Essar Limited,

~ Management Capability

 Valuation    

We valued the Piramal Health care on the basis of liquidating value. Then assigned a % to each assets and liabilities and got the fair value of the company around Rs. 496 which is 36% upside from current price. We think story will shape up (cash deployment decision unfold) in future and hence we recommend to buy at CMP for atleast 18-24 months perspective