Vivimed Labs is a good fundamental buy

Vivimed Labs is a good fundamental buy

By Rajiv Kapoor | 6 May, 2017

Vivimed Labs was established in 1991 at Hyderabad and has now metamorphosed from a small entrepreneurial family-operated business to a globally renowned supplier of niche molecules and formulations across healthcare, pharmaceuticals and specialty chemicals consumers across the world. Active ingredients manufactured by the company are the preferred ingredients in home and personal care segments such as hair, skin and oral care of leading global FMCG conglomerates. The current product portfolio caters to over 75% of the ingredient market and is also present in the industrial care segment such as photo chromic dyes and imaging chemicals. The company plans to expand its operations in the fast-emerging and highly demanding sector of Printable Electronics and Organic Semiconductors. Vivimed’s presence in Active Pharmaceutical Ingredients , Finished Dosage Formulation and Retail Branded Formulation manufacturing caters to the inner health of people. Within 25 years of inception, it has established 12 manufacturing facilities, five research and development centres (three domestic and two overseas) and global support offices in China, Europe and USA. Focus on quality and compliance reflects in four of its manufacturing facilities being US- FDA approved. The company has recently received ANDA for five products in the US and thereof, the capacity utilisation is being increased from 35% at present to 60% in the next 1-2 years. In FY 16, the company divested a part of its speciality chemical business comprising of home and personal care segments to Clariant India for a consideration of Rs 325 crore. This disinvestment was done to reduce debt and to refocus on the pharma and speciality chemical segments. Further, it has sold off its branded ophthalmic formulation business by the name of Klar Sehen for a consideration of Rs 73 crore which was again done to reduce the debt burden. Vivimed Labs has a strong long standing relationship with blue chip global names such as Procter and Gamble, L’Oreal and Johnson & Johnson, among many others. Consolidated revenue for the third quarter FY17 came in at Rs 363 crore, primarily driven by 19% y-o-y increase in revenue from the pharma business which actually accounts for 80% of the total company’s business. EBIDA for the quarter rose by 68% y-o-y to Rs 103 crore where the EBIDA margin stood at 28.5%, while Profit after Tax closed at Rs 51.7 crore. The margin expansion was due to decrease in cost of materials and partly due to decline in finance costs. The Vivimed stock currently quoting at Rs 108 is a good fundamental buy for smart investors looking at a nine-month time frame for a 30% price appreciation from the present levels.

Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.


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