Caplin Point Laboratories multibagger was recommended in November 2019 by Futurecaps after a strenuous research, however majority of times we end up surprising ourselves.
Multibaggers are stocks that give returns that are several times their current market price (CMP).
These are essentially stocks which have strong fundamentals but are undervalued by the market thus presenting as a great investment asset.
Multibagger stock companies have a strong corporate governance & potential of exponentially scaling the business.
At the time of our recommendation Caplin Point Stock was trading at Rs.314 post which many experts went against the recommendation due to its correction in the next 2 months. It was re-recommended at Rs. 220 levels since the EPS was growting & Debt was in favor of the company.
However, we stood by our experience & talented Market Research team which eventually paid off by giving an astonishing Return On Investment (ROI) of 200% from the re-recommendation.
Know about the company
Established in 1990 by visionary entrepreneur CC Paarthipan, the company’s targeted strategy focused on emerging markets of Latin America (Central and South America), Francophone and Southern Africa to cash in on the opportunity to grow in the then untapped markets.
Since the inception, Caplin Point Laboratories has established a strong market hold in semi-regulated markets of Central America such as Guatemala, El Salvador, Nicaragua, Ecuador and Honduras among others.
After writing history by growing in uncharted territories as a first mover, Caplin is looking at growth in mature markets.
These new markets of U.S. are a big opportunity but swarming with new challenges. That said, it is believed by many market experts that Caplin Point Laboratories is highly capable to replicate the success story in new markets as well.
Moreover, despite probable dent in margins due to investment phase in new markets, these moves continue to demonstrate earnings & balance sheet strength.
By thriving in lesser known Central America markets and entering the most difficult US generic pharmaceuticals code of injectables, that too in different therapies, Caplin Point has created its own identity with long drawn plans.
The company continues to offer a well balanced risk-reward scenario at current valuations.
Our Caplin Point Multibagger 2019 Analysis
Caplin Point Laboratories is an established Multibagger recommended by experts at multiple occasions since 2014.
After analysing the historic growth chart of 5 years, one can easily deduce that the Caplin Point stock has been consistently making profits for its shareholders.
As estimated the next phase of growth, channelled through Caplin 2.0 by penetrating Emerging Markets, has been highly successful.
Futurecaps research also revealed that company increased investment by 30% in R&D for the US regions & invested Rs.350 million through its CP4 unit dedicated to the US Market Injectables business which proved to be rewarding as Caplin Point Laboratories got
green signal for its Ropivacaine Hydrochloride injection from United States Food and Drug Administration (USFDA) in April 2020.
Ropivacaine Hydrochloride is a generic therapeutic equivalent version of NAROPIN Injection, of Fresenius Kabi USA LLC.
This is a local anaesthetic drug used for surgery or acute pain management.
Assuming Ropivacaine Hydrochloride was one of the 2 ANDAs (Abbreviated New Drug Application) filed during the period, we are still waiting for the outcome of the 7 more ANDAs yet to be filed as per our research.
Future Market Growth Potential
Global generic drug market is expected to grow at a CAGR of roughly 9.8% over the next five years.
It is estimated to reach $369400 million in 2024 from $210800 million in 2020, according to a New Research.
Report particularly focuses on the potential growth & demand of Generic Drugs in global market, especially in North America, Europe, Asia-Pacific and Africa.
Moreover, COVID-19 will disrupt the healthcare sector for good due to uncovering of numerous loopholes in the industry & emphasis on better infrastructure, access to healthcare and demand for affordable drugs will tremendously increase.
Considering Emerging Markets, they represent an exceptional opportunity for the pharmaceutical industry.
In a vague explanation, economists define emerging markets as developing prosperous countries in which investment is expected to result in higher income despite high risks.
Sales of the pharmaceutical industries in BRICS (Brazil,Russia,India,China & South Africa) and MIST (Mexico,Indonesia,South Korea and Turkey) countries almost doubled in five years, touching a market share of approximately 20%.
The potential towards these new markets has been attributed to their large populations, growing prosperity and increasing life expectancy.
Further pointing out in a surprising observation, a sudden rise in the cases of diseases such as cardiovascular illnesses, diabetes and cancer diseases has been noted in emerging markets similar to the Western counterparts.
The cases of diabetes and oncologic diseases is expected to grow by 20% or more by 2030 which unlocks the potential for pharmaceutical industries as they will also be able to expand their global products in these developing countries.
Whats Next for Caplin Point Multibagger ?
Even after a multibagger home run, Caplin Point Laboratories growth seems to be continuing.
With strong Cash Flow & negligible debt, company is now setting its eyes on expanding to mature markets with emerging markets.
Adding to that, the company also informed it is working on a portfolio of 35 simple and complex Injectable and Ophthalmic products, to be filed over the coming four years.
Our research shows Emerging markets account for 92% of revenues distributed as 88% Latin America (both Central & South America) and Africa with 4%.
Moreover, Caplin Point revenues grew at 25% CAGR over a decade mainly due to the early mover advantage in these untapped markets, geographical expansion from 2 countries to now spreading to 10 countries & ofcourse the ability to address market gaps, especially in the generics space with a hold on end-to-end distribution channels.
With such strong financials, strong market presence & growth potential, Emerging Markets revenues are expected to grow at 21% CAGR in FY19-22 to 1089 crore.
Caplin Point is Over-valued as per Oct 2020. We advise No New Entry into this Counter. Instead see our New Multibaggers.
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