The share price of Orchid Chemicals has taken a beating for the past few days. And that is precisely what makes it a good buy. The fall in the stock was directly attributed to Bear Stearns selling off a major chunk of its holding in the company. Selling was further triggered by promoters of the company selling a 7% stake to meet the margin calls. The promoters had earlier ramped up their holding from 17% to 24% and had borrowed the money to increase the stake. But when the margin pressure increased and the promoters did not have enough money to pay these off, they took to the recluse of selling their 7% stake and raising the money.
There is also news about the company having incurred some forex losses and it is also feared that FCCB of US$193 million due in 2012 would not get exercised and hence could remain as a debt in the books of the company.
On the financial front, despite all these turmoil’s, the company has been doing very well. For the third quarter ended 31st December 2007, YoY, the net sales rose by 39% at Rs.332.69 crore. EBIDTA was up 34% at Rs.104.87 crore. PBT almost doubled from Rs.31.28 crore to Rs.61.78 crore. PAT rose by a whopping 91% at Rs.54.12 crore. The company has posted an exceptional item of Rs.6.42 crore, representing exchange gain on outstanding FCCB. On this, the company paid a tax of Rs.2.19 crore which does not make the gain look very big now. On an equity of Rs.65.84 crore, the EPS is at Rs.8.20, which on the current price of Rs.118 gives a of PE of just 4.
The company has lined up 12 new products for launch over the next two years. The company has a very strong R&D, which has seven pre-clinical entities (total 15 molecules) targeting diabetes, infection, inflammation and oncology areas. Currently Orchid spends about 6-7% per cent of its sales on R&D. ORLL has filed 162 patent applications for new drugs and other innovative products. Well, with most of the drug majors spinning off their R&Ds into separate profit making entities, it will not be a surprise to see Orchid also do the same in the near future. At the current market price of Rs.118, Orchid is a good investment.
There is also news about the company having incurred some forex losses and it is also feared that FCCB of US$193 million due in 2012 would not get exercised and hence could remain as a debt in the books of the company.
On the financial front, despite all these turmoil’s, the company has been doing very well. For the third quarter ended 31st December 2007, YoY, the net sales rose by 39% at Rs.332.69 crore. EBIDTA was up 34% at Rs.104.87 crore. PBT almost doubled from Rs.31.28 crore to Rs.61.78 crore. PAT rose by a whopping 91% at Rs.54.12 crore. The company has posted an exceptional item of Rs.6.42 crore, representing exchange gain on outstanding FCCB. On this, the company paid a tax of Rs.2.19 crore which does not make the gain look very big now. On an equity of Rs.65.84 crore, the EPS is at Rs.8.20, which on the current price of Rs.118 gives a of PE of just 4.
The company has lined up 12 new products for launch over the next two years. The company has a very strong R&D, which has seven pre-clinical entities (total 15 molecules) targeting diabetes, infection, inflammation and oncology areas. Currently Orchid spends about 6-7% per cent of its sales on R&D. ORLL has filed 162 patent applications for new drugs and other innovative products. Well, with most of the drug majors spinning off their R&Ds into separate profit making entities, it will not be a surprise to see Orchid also do the same in the near future. At the current market price of Rs.118, Orchid is a good investment.
Source: Sptulsian.com
