IOL Chemicals & Pharmaceuticals Ltd. 2021 Multibagger Analysis
In this article, we can explore the possibility of IOL Chemicals & Pharmaceuticals Ltd as a Multibagger 2021 Stock based on Value Investing principles. IOL Chemicals and Pharmaceuticals Ltd., Which was incorporated in the year 1986, is a Small Cap company (Having a market cap of Rs 3,406.39 Crore) operating in the Pharmaceuticals sector.
About IOL Chemicals & Pharmaceuticals Ltd
IOL Chemicals and Pharmaceuticals Limited (IOLCP) is a leading organic chemicals manufacturer and supplier. IOLCP is an Indian manufacturer of industrial chemicals & bulk Drugs for over two decades. IOL Chemicals & Pharmaceuticals Ltd was established in 1986. They are a significant player in the Organic chemicals space. IOLCP has a wide presence across various therapeutic categories.
- Pain Management
- Anti hypertensive
- Anti Convulsant etc.,
IOL Chemicals & Pharmaceuticals Ltd Innovative Strengths & Strong Growth have made them the market leaders. They have built up our expertise responding to diverse customer requirements
Through a relentless focus on Quality and Commitment & Delivery. IOL Chemicals & Pharmaceuticals Ltd have charted their way to success in our operations and have won the admiration of our customers and investors. Their success is built on the strong foundations of innovation, quality, & dedicated customer service. By incorporating these & other business strategies, They have boosted the company’s capabilities to maintain the leading edge in the industry & earn the loyalty of customers.
About Product Brands
IOL Chemicals and Pharmaceuticals Ltd. key Products/Revenue Segments include Bulk Drugs, Chemicals, Others, Export Incentives, Other Operating Revenue for the year ending 31-Mar-2020. Their business portfolio consists of 2 sections…
- Active Pharma Ingredients: Under API division in Pain Management and its derivative and salts, in LifeStyle Drugs Metformin Hydrochloride, Lamotrigine, Fenofibrate Clopidogrel Bisulphate Ursodeoxycholic acid and many more are developed for commercial distribution across the globe. The company is focusing on generic product development and cost-effective commercialization
- Speciality Chemicals: The Speciality Chemicals division produces Ethyl Acetate from organic alcohol for use in a variety of different products, including flexible packaging, pharmaceuticals, textiles, food processing, pesticides and paint industries.
Warren Buffet, Value & Growth Checklist
|Sales Increasing past 1 Year||Yes, 20%|
|Profit Increasing past 1 Year||Yes, 19%|
|Durable Competitive Advantage||Yes|
|Debt Equity Ratio||0.07|
|Intrinsic Value Discount||90%|
|Promoter Holding & Increase||41.89% increased to 43.69|
|Multibagger Returns||300-500% 5 Year|
Business and Industry Analysis
- Compared to industry peers: NPM is higher than that if the peers at 14% and its OPM is at 30%. 5 years of sales growth is at a high of 25%
- Increases in production capacity and sales volume: Company is planning on expanding. During this year the company has installed an enhanced capacity of Metformin from 3,000 TPA to 4,000 TPA with a CAPEX of ₹2.71
- The Company successfully set up its unit V to manufacture Clopidogrel Bisulphate & Fenofibrate with a capacity of 180 MT per annum with a CAPEX of ₹19.26 crore.
- The Company has also enhanced existing manufacturing facilities of Ibuprofen from 10,000 TPA to 12,000 TPA and Iso Butyl Benzene from 9,000 TPA to 12,000 TPA in May 2019 with a CAPEX of ₹12.10 crore. All CAPEX was funded through internal accruals alone.
- Converting sales into profits: Increasing sales and increasing the price of Ibuprofen both led to an increase in profits for the last 2 years.
- Employee & Interest Expense: Company has spent 1.1% of its operating revenues towards interest expenses and 5.13% on employee cost in the year ending Mar 31, 2020.
- Growing Profit Margin: IOLCP’s current net profit margins (23.6%) are higher than last year (19.9%).
- The company has shown significant improvement in Revenue and Net Profit in 2018 and 2019 due to the selling price of Ibuprofen has increased from Rs 660 in Oct-16 to Rs 1170 in Sep-19 an increase of 77%.
- The massive increase in the operating profit margins from 9% in 2016 to 24% in 2019 has been due to a significant increase in the selling prices of its two main products – Ibuprofen and Ethyl Acetate which comprise (90%) of the revenue.
- BASF has planned a mega plant for Ibuprofen in Germany which is going to come live in 2022
Other business parameters of IOL Chemicals and Pharmaceuticals Ltd are
- Product diversification: Pure Play
- The company is supplying to different countries and has to adhere to their rules and regulations like FDA norms.
As per our research, we determine the value stock to trade at P/E of 15+ Currently, the stock is trading at just 3.7x. Looking at the trend we are quite bullish on IOLCP. Investors can accumulate this share with keeping a stop loss of Rs165 for an upper target of Rs300-375 in next18 to 24 months.
The company have Multibagger Potential. However, this is not a Multibagger Recommendation. To all Investors due-diligence required.