Vivimed is a ‘buy’ for one year

Vivimed is a ‘buy’ for one year

By Rajiv Kapoor | 18 June, 2017

The Indian pharmaceuticals market is the third largest in terms of volume and 13th largest in terms of value. It is the largest provider of generic drugs globally, with Indian generics accounting for 20% of global exports. Currently, consolidation has become an important characteristic of the Indian pharmaceutical market, as the industry is highly fragmented. The country enjoys an important position in the global pharmaceuticals sector, with a large pool of scientists and engineers who have the potential to steer the industry ahead. Presently, over 80% of the antiretroviral drugs used globally to combat AIDS are supplied by Indian pharmaceutical firms. The Indian pharma industry is expected to grow at over 15% per annum and reach a size of US$55 billion by 2020. The government has amended the foreign direct investment (FDI) policy in the pharmaceutical sector, to allow FDI up to 100% under the automatic route for manufacturing of medical devices. According to official data, the drugs and pharmaceuticals sector attracted cumulative FDI inflows of US$14.53 billion between April 2000 and December 2016. Government of India has unveiled “Pharma Vision 2020” aimed at making India a global leader in end-to-end drug manufacture, with reducing approval time for new facilities to boost investments. Further, the government has introduced mechanisms such as the Drug Price Control Order and the National Pharmaceutical Pricing Authority to deal with the issue of affordability and availability of medicines. The Indian pharmaceutical market size is expected to grow to US$100 billion by 2025, driven by increasing consumer spending, rapid urbanisation, and raising healthcare insurance. In the Indian pharma space, the Vivimed Labs Limited stock looks good for investment purpose from fundamental perspective. It was established in 1991 in Hyderabad and is presently a globally renowned supplier of niche molecules and formulations across healthcare, pharmaceuticals and speciality chemicals, with consumers in nearly 50 countries. The company has two business divisions: the Healthcare division, which manufactures APIs and formulations, while the Specialty Chemicals division is a leader in hair-dyes and photochromic products. At the current market price of Rs 115, the stock P/E ratio is 3.76 times’ FY18 earnings and 3.41 times’ FY19 earnings respectively. The earning per share of the company for FY18E and FY19E is seen at Rs 30.65 and Rs 33.79, respectively. On the other hand, net sales and PAT of the company are expected to grow at a CAGR of 7% and 40% respectively over the next few years. The Vivimed stock merits a buy for a one-year investment perspective, with a 35% price appreciation.

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


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