Bafna Pharmaceuticals Ltd by Team - Arunthestocksguru

Scripscan:Bafna Pharmaceuticals Ltd
Traded in:Nse-bse
CMP:17.75
Target:50% CAGR for the coming several years.

Story:There has been some interesting development recently which has compelled me to suggest it.The company's brand Raricap,which contributed around 8crs sales last fiscal,has doubled its sales to 16crs in this fiscal.Further in the month of April 13 alone,Raricap has chipped in with a figure of 2.18crs and is all set to clock around 25-28crs revenue in fy13-14.Bafna has also received product approval from Ghana to market Omeran-20 capsules used for the treatment of reflux oesophagitis among others.The drug contains generic salt- Omeprazole and its international classification of diseases is Omeprazole.With this, Bafna now has 15 number of formulation approvals from Ghana Food and Drug Administration.It will strengthen its market in Ghana and will help it to penetrate in its target market segment.Bafna is a company which is far away from investor's fancy.Nobody talks about it,no analyst posses any coverage and that is its biggest trigger.With time,as the company delivers more revenues with higher margins,its ought to trade at higher multiples.Sales should be around 280-300crs in 13-14.By 15-16 the present 170crs company should be a 500crs revenue company.The management guided PAT margins of 15% by 15-16.

Business:Bafna Pharmaceuticals Ltd is a Chennai-based company.The company is engaged in the business of manufacturing of pharmaceuticals formulations of Betalactum and NonBetalactum products.Bafna Pharmaceuticals has EU - GMP, UK - MHRA, TGA Australia accredited facility in Non Betalactum solid oral Dosage forms providing consistent and unmatched service by supplying hi-end pharmaceutical formulations to Regulated Market of United Kingdom, Europe and Australia apart from Emerging Markets like Sri Lanka, Africa and CIS countries etc. Currently it manufactures and market over 336 licensed pharmaceutical products across various therapeutic spectrum.It has expanded its presence from 80 product registrations and 81 product applications in FY 10 to 119 product registrations and 170 product applications in FY 12. This includes 30 site variation approvals from UK.Bafna also expanded the potential of product presence in 23 countries.Looking ahead,Its strategically poised to enter into the arena of Contract Research & Development on a larger scale with its dedicated state -of -the-art R&D facility in the regulated markets.The company has identified domestic branded formulations business as one of key focus areas for company''s long term value growth.It made a bold move by acquiring the marquee brand 'Raricap' from Global Pharma MNC Johnson & Johnson which positioned the company as an active player in domestic branded formulations market.Traditionally,Company has been strong in export/contract manufacturing and has clocked revenue of Rs. 40 Cr in FY 12, a 100% YOY Growth.Bafna has outlined a multi-pronged approach to drive growth. It intends to strengthen its contract research and manufacturing services (CRAMS) business by expanding to high margin products and geographies. The company also wants to increase its portfolio of branded generics for promotion in the domestic and non-regulated markets.

Conclusion:In the domestic market, the company predominantly used to earn bulk of its revenues from the low margin institutional tender business.The company's strategy of shifting from the low margin tender business to the high-margin branded generics business has already started to reflect which can be gauged from the recent numbers.The coming quarters too should see handsome performance with better margins.Bafna continues to focus on growing revenues,improving margins and thus enhancing market value of the company.The company has launched three more brands namely BSF (Dietary Supplement),Molev (Antiasthamics) and Lopih (Lowering pregnancy induced hypertension) segments for women wellness.It will continue to launch more brands across the geographies both in domestic and international markets.With all these measures in tow, the company intends to achieve revenues of Rs 500 crs by 2015 end.The company's stock is currently trading at a P/E of 3.5x of its expected fy13-14 earnings of 5rs.But earnings wouldn't be the right valuation metric to evaluate a pharma company.Typically, pharma companies trade at twice and more of their revenues.Bafna Pharma is currently trading at a market cap of Rs 35 crs,just a fraction of its expected total revenues of Rs 280-300 crs.With everything looking up for the company backed by an experienced visionary quality pedigree team,Bafna pharma is a great buy.