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India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Buy
CMP: INR 347
Target: INR 471
Elder Pharmaceuticals Ltd. is an integrated pharmaceutical company that is mainly involved in manufacturing & sales of
branded formulations and Active pharmaceutical Ingredient (API). Elder has its presence in niche therapeutic segments
like women’s healthcare, wound & pain management, Neutraceuticals and Lifestyle disease care portfolio with strong
brands like Shelcal, Eldervit, Chymoral etc that have dominant market shares in their respective segments. The company
has strong alliances with almost 24 international innovator companies for in-licensing their products in India.
Investment Rationale
Strong domestic foothold
Elder derives 76% of its revenue from Domestic business and has been a strong player in branded formulation space.
The company has some strong brands like Shelcal, Eldervit, and Chymoral that has established Numero –Uno
positions amongst their peers. Most of its brand has a dominant market share in its respective segments. Domestic
business has been the primary focus of the company with the extensive brand portfolio across therapies. Despite
strong competition in the domestic market, Elder has been able to maintain its growth rate due to its strong brand
image and strong rapport with the medical fraternity.
In-licensing deals & Strong product pipeline
Elder generates around 6% of its revenue from in-licensing deals. Elder has successful in-licensing agreements with
around 24 international innovator companies, for marketing their products in India. Considering Elder’s past record
of the in-licensing deals and its ability to convert the products into big brands, the alliances with innovators seem to
be a positive future growth strategy for the company. The company has a strong product pipeline of around 35
products, which are expected to be launched over a period of 3-4 yrs.
Wide network coverage and expansion of geographic presence
Elder is concentrating on expanding marketing & distribution reach with a particular focus on rural & semi-urban
markets, thus strengthening its domestic business. The company has taken initiatives like creating new divisions viz;
Elvista & Adventus, increasing MR strength and widening the therapeutic coverage. Currently, Elder covers
approximately, 410000 doctors and 80,000 pharmacies every month.
International acquisition to aid the company’s growth
Elder recently acquired 100% stake in UK based NeutraHealth Plc, with an aim to gain access to the multiple brands
in the UK and establish a footprint in the regulated EU markets. The acquisition of NeutraHealth with an investment
of INR 1340 mn has been a synergetic operation. With an intention of entering the German market, Elder acquired
Biomeda Ltd. (having a stake of 92.2% in the company) with an investment of INR 400 mn. Elder is expected to
make a CAPEX of around INR 220 mn in Biomeda, for up-gradation of its facilities and make it EU compliant.
Outlook & Valuation
The stock currently trades at 8.3x & 6.4x its FY12e and FY13e earnings. Given the strong presence in domestic space and
product pipeline with market leading brand portfolio, the growth prospects of the company look very strong. We
recommend Elder Pharmaceuticals Ltd. with BUY rating and a target price of 471, valuing the stock at 8.5x its FY13e
earnings with medium to long-term perspective.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Buy
CMP: INR 347
Target: INR 471
Elder Pharmaceuticals Ltd. is an integrated pharmaceutical company that is mainly involved in manufacturing & sales of
branded formulations and Active pharmaceutical Ingredient (API). Elder has its presence in niche therapeutic segments
like women’s healthcare, wound & pain management, Neutraceuticals and Lifestyle disease care portfolio with strong
brands like Shelcal, Eldervit, Chymoral etc that have dominant market shares in their respective segments. The company
has strong alliances with almost 24 international innovator companies for in-licensing their products in India.
Investment Rationale
Strong domestic foothold
Elder derives 76% of its revenue from Domestic business and has been a strong player in branded formulation space.
The company has some strong brands like Shelcal, Eldervit, and Chymoral that has established Numero –Uno
positions amongst their peers. Most of its brand has a dominant market share in its respective segments. Domestic
business has been the primary focus of the company with the extensive brand portfolio across therapies. Despite
strong competition in the domestic market, Elder has been able to maintain its growth rate due to its strong brand
image and strong rapport with the medical fraternity.
In-licensing deals & Strong product pipeline
Elder generates around 6% of its revenue from in-licensing deals. Elder has successful in-licensing agreements with
around 24 international innovator companies, for marketing their products in India. Considering Elder’s past record
of the in-licensing deals and its ability to convert the products into big brands, the alliances with innovators seem to
be a positive future growth strategy for the company. The company has a strong product pipeline of around 35
products, which are expected to be launched over a period of 3-4 yrs.
Wide network coverage and expansion of geographic presence
Elder is concentrating on expanding marketing & distribution reach with a particular focus on rural & semi-urban
markets, thus strengthening its domestic business. The company has taken initiatives like creating new divisions viz;
Elvista & Adventus, increasing MR strength and widening the therapeutic coverage. Currently, Elder covers
approximately, 410000 doctors and 80,000 pharmacies every month.
International acquisition to aid the company’s growth
Elder recently acquired 100% stake in UK based NeutraHealth Plc, with an aim to gain access to the multiple brands
in the UK and establish a footprint in the regulated EU markets. The acquisition of NeutraHealth with an investment
of INR 1340 mn has been a synergetic operation. With an intention of entering the German market, Elder acquired
Biomeda Ltd. (having a stake of 92.2% in the company) with an investment of INR 400 mn. Elder is expected to
make a CAPEX of around INR 220 mn in Biomeda, for up-gradation of its facilities and make it EU compliant.
Outlook & Valuation
The stock currently trades at 8.3x & 6.4x its FY12e and FY13e earnings. Given the strong presence in domestic space and
product pipeline with market leading brand portfolio, the growth prospects of the company look very strong. We
recommend Elder Pharmaceuticals Ltd. with BUY rating and a target price of 471, valuing the stock at 8.5x its FY13e
earnings with medium to long-term perspective.
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