Syngene stock is a good investment

Incorporated in 1993 and headquartered in Bangalore, Syngene is an 83.6% subsidiary of Biocon Limited. The company is one of the leading contract research organisations (CRO), offering a suite of integrated, end-to-end discovery and development services for novel molecular entities across industrial sectors, including pharmaceutical, biotechnology, agrochemicals, consumer health, animal health, cosmetic and nutrition companies. The company has several long-term relationships and multi-year contracts with its clients, including three long-duration multi-disciplinary partnerships, each with a dedicated research centre, with three of the world’s leading global healthcare organisations Bristol-Myers Squibb, Abbott Laboratories and Baxter International. 

Syngene International Ltd. came with a public equity issue of around Rs 550 crore to sell 2.20 crore shares by the Promoters entity (Biocon Ltd.) and get the equity shares listed on the stock exchanges. The company did not receive any proceeds of the offer for sale and all the money went to the Selling Shareholders.  In FY12 the company had 103 clients and in 3 years it had managed to double its client base to 221 clients. The company is evolving as a Contract Research and Manufacturing Services (CRAMS) organisation with commercial-scale manufacturing capabilities from currently serving as a CRO. The company has planned a capital expenditure of USD 200 million for the next three years by funding it with a mix of debt and internal accruals. Half of the total expenditure would be utilised for establishing new commercial-scale manufacturing facility in Mangalore to manufacture small molecules for companies across various sectors like pharmaceuticals, agrochemicals and other industrial sector while the balance amount would be utilised to expand its existing manufacturing capacity of large molecules at Bangalore. The company reported a net profit of Rs 175 crore and total revenues of Rs.871.6 crore in FY15. Of the total revenues in FY15, 36.1% were derived from sale of services with dedicated infrastructure and 63.9% from other contracts. Of the total revenues from sale of services; 95% were derived from exports and 4.9% domestically. For the third quarter of the current FY, Syngene reported a 31% rise in net profit to Rs 59 crore while income from operation rose to Rs 280 crore for the same period. The company has recently successfully cleared USFDA audit for its clinical development facility. The stock currently quoting at Rs 375 on the Indian bourses is a good buy for portfolio investors with a price target of Rs 480 in the next one year.