- 1. Poly Medicure Ltd is a manufacturing company producing
medical disposables for thehealthcare industry. Research efforts
put-in by the company in last several years has led toit filing
more than 70 patents out of which it has already got 10 in its
kitty with 2 being inworlds largest medical disposables market
viz., USA. The company is expanding its product portfolio and is
entering new markets as well. Street Smart" - Mid Cap Multibagger
for Apr 2010 HBJ Capital Services Pvt Ltd Web: www.hbjcapital.com
Mail: [email protected] Call: +91 98867 36791
2. Best Buying Price2 Phase Buying Strategies Suggested [Always
buy in SIP ways]1st Phase : Buy at the current price range Rs 108
112 [50% of investment]2nd Phase : Add when the price falls down to
Rs 80 92 [50% of investment]Average Buy Price Recommended = Rs. 100
[(110 + 90) / 2]>>>Expect at least 4-5 times returns in
next 3 years timeframe!!! 3. HBJ Cap is growingfaster than ever.
HBJ Capital can be your50x in 3yearsinvestment. Ask how? Aim to
become #1 - Equity Research Company in Indiaby 2012, the sameWhat
Next?year we haveplanned to get it listed at BSE/NSE.HBJ Capital
Specialists in discovering multibagger stocks is launchingmore
& more innovative products & services with single focus on
long term wealth creation!!! 4. Table of Contents From the desk of
CEO, HBJ Capital. Poly Medicure Ltd Page#7 Key Positives Page#11
Investment Rationale Page#17 Financial Statements Page#26
Management Team Page#33 Best price to buy Page#36 Challenges/Risks
involved Page#38 Know more about Your - HBJ Capital. 5. From the
desk of CEO, HBJ Capital Dear Investors, The world is going to
focus onmaking healthcare affordable forall. It is being seen that
many of the There is no denying that today the whole world is
increasingly international players are setting upfocusing on
affordable healthcare. Due to focus on reducing coststheir R &
D facilities, manufacturing plastics have come to the fore front of
medical innovation. In aplants in India due to its significant cost
advantage. country like India where the focus on improving the
healthcare Many of the small Indiansystem is increasing by the day,
the medical disposables industry companies have already startedwill
have a major role to play to help achieve the final goal.exporting
medical equipments tothe rest of the world!! With a population of
1.15 billion, India will need to at least 2 million beds in the
next 10 years in order to attain a modest target of 2 per 1000 of
population. With a total healthcare value of Rs 1800 billion, the
potential for medical disposables equipment is, indeed large. The
Indian domestic medicare devices industry is expected to grow from
Rs 60 billion to Rs 76.5 billion in four years. The overall market
is estimated at Rs 150 billion. Apart from the electronic
instruments and major equipment, substantial progress has been
registered in the area of a number of medical accessories and
consumables. These include disposables - syringes, blood bags,
cannulae, IV fluid sets, gloves. In most of these items, while the
demand is increasing fast, India is becoming increasingly self-
sufficient. Fairly large quantities are also being exported. 6.
ContdThings are already improving for Indian Medicare equipment
manufacturers. India is being looked upon by thewhole world to
provide low cost solutions with regards to medical accessories,
consumables & disposables. ManyIndian companies have been able
to sell their products across the globe due to price advantage.With
the new US healthcare bill focusing on reducing healthcare costs,
these small Indian companies could have agood time in the coming
few years.And we believe that its just time for our Street Smart
company for this month to make use of the wonderfulopportunity. We
are happy to select Poly Medicure Ltd as the Street Smart for the
month of Apr 2010.Poly Medicure Ltd. is a medical disposables
manufacturing company. The company is currently availableat a
market cap of 122 Crore and at a valuation of 9.8 times TTM
earnings. We are expecting anearnings growth of around 40% CAGR in
the next 3 years for the company. At such growth levels, thecompany
should be able to post earnings of more than 40 Crore by FY
13.Considering a moderate valuation of 13 on TTM earnings would
give a market cap of around 520 croreand thats a 4.4 bagger from
the current levels.Happy Investing!RegardsKumar Harendra, CEO, HBJ
Capital Services Pvt Ltd, www.hbjcapital.com#912, 1st F Main Road,
Girinagar 2nd Phase, BSK 3rd Stage, Bangalore 85Call : 098867 36791
or Mail : [email protected] 7. Poly Medicure Ltd Snapshot (Apr
28th 2010)CMP Rs. 111.65 (The share price of the company
hasPromoters holding 47.81% (The promoters haverebounded smartly
since its lows last year and is closer to its maintained their
holdings in the company for the past severallife time highs.years.
Also, we believe that there could be substantial amountof indirect
holdings in the company.)This is an indicator of the strong
business fundamentals ofthe company and the new found opportunities
for the Pledged shares 0%company).Total # of shares 1,09,06,250
sharesMCap 122.95 crore (We are expecting an earningsgrowth of
around 40% CAGR in the next 3 years for the Liquidity Low to
Mediumcompany.Face Value Rs. 10At such growth levels, the company
should be able to postearnings of more than 40 Crore by FY 13 and
assuming aAuthorized Capital Rs.9 crorevaluations of 13 gives a
market cap of more than 500 crorefor the company)Issued Capital Rs.
5.5 crorePE 9.8 (We find that the current valuations are
impressiveWebsite: http://www.polymedicure.comconsidering that it
on TTM earnings.)EPS Rs. 11.5 (based on the TTM basis)52 Week High
/ Low 125 / 36.75 (The managementrecently came out with a 1:1 bonus
issue for the company.And the stock made its recent highs close to
the bonus issue.) 8. Poly Medicure LtdPoly Medicure Ltd is a
manufacturing company producing medical disposables for the
healthcare industry.Founded in 1995 by a team of technocrats
dedicated to the idea of providing the benefits of modern
healthcare tothe mankind at affordable price, PML today has grown
into one of the most dynamically versatile manufacturers
ofdisposable healthcare products in the region with over 60
different products.The company uses modern manufacturing techniques
to provide the best quality products. It exports its products to50
countries currently with Europe being the major market at
present.Research efforts put-in by the company in last several
years has led to it filing more than 70 patents out of which ithas
already got 10 in its kitty with 2 being in worlds largest medical
disposables market viz., USA. 9. Product RangeInfusion Therapy - In
medicine, infusion therapy deals with all aspectsof fluid and
medication infusion, usually via the intravenous route. Thesimplest
form of intravenous access is by passing a hollow needlethrough the
skin directly into the vein.This needle can be connected directly
to a syringe (used either towithdraw blood or deliver its contents
into the bloodstream) or may beconnected to a length of tubing and
thence whichever collection orinfusion system is
desired.Manufactured from tested bio-compatible materials offering
longerindwelling time. PML manufactures various different types
ofequipments for infusion therapy.Central Venous catheter - In
medicine, a central venous catheter("central line", "CVC", "central
venous line" or "central venous accesscatheter") is a catheter
placed into a large vein in the neck (internaljugular vein), chest
(subclavian vein) or groin (femoral vein). It is usedto administer
medication or fluids, obtain blood tests (specifically the"mixed
venous oxygen saturation"), and directly obtain
cardiovascularmeasurements such as the central venous
pressure.Anesthesia - PML manufactures different types of catheters
for directadministration of oxygen into the patients body. 10.
Product RangeUrology - PML manufactures various different kinds of
products forcollection of urine & urine
samples.Gastroenterology - PML manufactures various different kinds
ofproducts for treatment of gastro intestinal problems.Various
kinds of products are manufactured for introduction of
nutrition& aspiration of intestinal secretion.Blood management
- PML manufactures various products for bloodtransfusion, blood
sample collection etc.Surgery & Wound drainage - Wound drainage
system suitable fordrainage under negative pressure post
operatively with the options tooperate one or two catheters
simultaneously.Dialysis - PML manufactures various products which
are required forpatients undergoing dialysis.Others - PML
manufactures various other safety devices used forvarious
treatments. 11. Key Positives 12. Modern Manufacturing
facilitiesPOLYMED manufactures its products using state of the art
technology in ultra modern facilities covering over300,000 square
feet of manufacturing floor space with about 50,000 square feet of
clean rooms of class 100,000to class 1,000.A tool room with modern
facilities & CNC machines supports the manufacturing processes.
A high degree ofautomation and an effective process control helps
in delivering consistent product quality.Polymed has
state-of-the-art manufacturing plants in Haridwar, Jaipur &
Faridabad in India and one in China andone joint venture in Egypt.
13. Highly trained personnel and a strong R and DOne of PMLs core
strength has been its well trained and technically competent
personnel. A highly qualified,experienced management provides
guidance and support to the team of over 2000 people employed in
differentactivities.To keep pace with the ever changing
requirements of the market, POLYMED has a fully staffed and highly
equippedR & D section to design and develop new and innovative
products. The R and D department of the company isrecognized by the
Ministry of Science and Technology, GOI.The company has been
constantly innovative and on an average has been coming out with 10
new products everyear for the last 3 years. In the last 3 years
alone, the research division of POLYMED has filed for more than
70patents. And in 2009, the company has received approvals from the
US FDA for several of its new range ofproducts including IV
Catheter and Syringes. 14. Geographic diversificationThe company
derives around 75% of the revenues from exports and the remaining
comes from the domesticmarkets. While the company has been
concentrating on overseas markets due to better margins, the
company hasstarted tapping the huge domestic opportunity as well.
There is enough headroom for growth in the domesticmarkets.In the
Overseas markets, Europe is the biggest market for the company and
it contributes approximately 35% oftotal revenues. The company also
derives substantial amount of revenues from Middle East and Africa
as well. Inall, the company currently exports its products to more
than 80 countries.While this being the current scenario, the
companys recent entry into US, the largest healthcare market in
theworld augers well for the growth ahead and the geographic
diversification of revenues. 15. Quality AssuranceThe companys
Quality system contains veryexhaustive series of physical,
chemicalbiological and microbiological tests andinspection at
various stage of themanufacturing cycle.The company has adapted to
thesurveillance of raw materials and itssuppliers, intensive
process control of allmanufacturedcomponents and subassemblies to
the final inspection and testingof the finished products.The
company has been successful inimplementing a well documented
QualityManagement system which has beenaccredited to SGS Yarsley
InternationalCertification services along with ISOcertification and
CE mark from DNV,Norway which makes the entire productrange
compliant with International Qualitystandards.Some of the companys
products are US FDA510K approves. 16. Indias Low Cost Labor
AdvantageIndia is becoming a hot destination for the offshore
manufacturing outsourcing. Number of foreign companieslooking to
establish their own manufacturing facilities in India are
increasing rapidly.Labor costs are a large part of the total costs
of a companys products . Since they are such a major part of
whatmakes up the selling price, these costs must absolutely be kept
down in order for a company to survive.India has a huge advantage
with regards to the quality of skilled & unskilled manpower
that is available in thecountry. 17. Investment Rationale 18.
Market Evolution 19. Indias Healthcare Expenditure as % of GDPIndia
currently has a very low spend on healthcare as a % of the total
GDP As on 2009 healthcare contribution.was around 5.5% of the total
GDP. This number is very small as compared to the 16% spent by USA
& 7-9% spentby European countries.According to estimates, this
number is going to increase significantly over the coming years.It
is crystal clear that with the fast commercialization process of
the sector and up gradation of medical facilities, thepotential is
sky high. 20. Strong growth in demand With a population of 1.15
billion, India will need at least 2 million beds in the next 10
years in order to attain a modest target of 2 per 1000 of
population. With a total healthcare value of Rs 1800 billion, the
potential for medical disposables equipment is, indeed large. The
Indian domestic medicare devices industry is expected to grow from
Rs 60 billion to Rs 76.5 billion in four years. The overall market
is estimated at Rs 150 billion. With increasing demand for quality
healthcare, corporate hospitals have aggressive expansion plans to
scale up their activities and have an all India presence. They are
creating great opportunities for medical device companies. The
hospital sector is expected to grow at 15% p.a. for the next 5
years and will create huge opportunities for medical device
companies. Polymed has been active in scouting for partnerships
with major hospital chains. The company has already tie ups with
few hospital chains through which they provide the medical
equipments for all the hospitals. Other than private hospital
chains, the company has also plans to target private nursing homes.
21. Focus on Domestic marketsDuring FY 2009 PML got 25% of its
revenues from domestic sales. And, two years back the domestic
markets werecontributing less than 15% to the total revenues.
Clearly, the company has making its moves to tap the hugedomestic
opportunities.During the last 1 year PML has started to market its
products aggressively in the Indian markets. PML has openednew
sales offices in Hyderabad, Chennai & Kolkatta. PML is planning
to increase its domestic sales force by 25%during the year.PML is
also focusing on providing medical disposable equipments for the
purpose of various state run healthcareprograms. PML expects to tie
up with government of Maharashtra, Gujarat & Rajasthan for the
same.Within a couple of years, management expects domestic market
to contribute 50 % of its sales up from 25 % itcontributes at
present. 22. US Healthcare Bill & India AdvantageThe reform
bill which has recently been passed into law in the US hastwo key
features. It increases health coverage and aims at the reductionin
healthcare costs.The bill increases the coverage to an additional
32 million uninsuredAmericans who make up about 10 per cent of the
total US population.The bill prohibits insurance companies from
excluding people with pre-existing medical conditions and dropping
policy holders on account ofcoverage limits.Secondly, the bill
which is expected to cost US taxpayers $940 billionover the next
decade is expected to reduce the US fiscal deficit by
$143billion.With the recently announced bill healthcare companies
in USA areunder tremendous amount of pressure to cut down their
costs. It isbeing estimated that by 2012 India would be getting 70%
of the R&Dwork to be carried out for various healthcare
companies.The trend of US based companies setting up their
production base inIndia is on a rise.Indian companies manufacturing
quality & low cost healthcareproducts are at a significant
advantage. 23. Expansion PlansPML is planning to expand its
manufacturing capacity with an investment of Rs 40 crore in the
next two years in aneffort to grab the market and contract
manufacturing opportunities in the US and Europe.PML currently has
a capacity to manufacture 260 million pieces of medical devices per
annum, is planning toexpand the current facility and will set up a
new plant exclusively for exports to European Union markets. With
theexpansion, the capacity will reach production of 400 million
pieces of medical devices per annum.The expansion of current
facility, is in tune with the fast growing market demand in the
country. Expansion will becompleted within 2010 even as the export
oriented unit will be functional in 2011.Around 50 per cent of the
investment will be infused from the internal accruals whereas the
rest will be based onloans. 24. JVs & Acquisition PlansIn a
recent interview the company management said that PML was mulling
on acquiring a medical devicescompany with research and development
focus in US, by spending around USD 20 to 30 million.Poly Medicure
Ltd (PML) is in talks with a European company to develop, design
and manufacture safety medicaldevices in the country.Any further
developments on this front could significantly enhance the
profitability for the company. 25. Recent developments B Braun had
recently initiated a series of cases against Poly Medicure in the
area of safety IV catheters. The Regional Court of Dsseldorf,
Germany, which handles a significant part of patent infringement
cases in Europe, has removed preliminary injunction which was
issued in favor of B Braun Melsungen AG in November 2009. With the
removal of the preliminary injunction, Poly Medicure and its
distributors can now sell the product in Germany. While, the
charges of infringement on PML was already cleared in India, the
same happening in the home turf of B Braun is comforting. PML had
launched 2 niche products in Indian market viz., blood collection
tubes & insulin syringes in May 2009. Both the products command
a healthy domestic market share. The company expects to
significantly increase revenues from these 2 products. PML has got
5 USFDA approved products. 3 out of the 5 products i.e IV Catheter,
Safety Scalp Vein Set and Safety Infusion Set, can easily
contribute revenues to the tune of Rs. 50 crs for the company. The
IV Catheter product manufactured by the company has a global market
of more than US$1 Bn. The IV catheter product manufactured by PML
is much superior in quality & has been priced lower than its
global competitors. 26. Financial statements 27. P and L statement
Annual (Standalone) 28. P and L statement Annual (Consolidated)The
revenues of the company have been constantly increasingover the
year. The increase in turnover is indicative of the factthat the
products of the company are doing well. As thecompany derives 75%
of its revenues from exports it can besaid that the products of the
company meet global standards.Also, during 2009 the company faced a
loss of close to Rs. 10crs on account of rupee depreciation. The
profitability marginswould have been much better if this loss would
have beenreduced.Going forward we expect the margins of the company
toimprove significantly due to the launch of US operations
&increasing focus on domestic markets.We expect the company to
post a Net Profit margin of close to12 to 13% going ahead. We
expect the company to postrevenues of around 130 Crore for the FY
2010. We also expectthe company to grow its revenues at a CAGR of
around 35-40% for the next 3 years leading to revenues of around
350Crore by FY 13.We also expect the earnings to grow at a similar
pace and thecompany should be able to post net earnings of more
than 40Crore by FY 13. 29. P and L statement - QuarterlyIt can be
seen that during the recent quarters the PAT margins have improved
significantly. We expect the companyto post modest sales growth on
a YoY basis.Going forward we expect the company to post robust
sales growth once the capex has been completed by the endof 2010.
We also expect the US business to make significant contribution to
revenues & improve margins during thenext few years. We expect
the company to make an EPS of close to Rs.14/ for the year. This
EPS has been calculatedon a 1:1 bonus which the company has issued
recently. 30. Balance Sheet - Standalone 31. Balance Sheet -
Consolidated The company has not diluted much equity in the last 5
years to manage its growth. The Debt to equity level for the
company has been reasonable in the last few years. Going forward
the company plans to raise some debt for its future expansion
projects. Total Gross Block of assets of the company has seen a
strong growth over the years. Over the years the company has been
able to achieve its scheduled capex plans on time without any
significant delays. We expect the same to continue going ahead. The
current assets of the company have increased reasonably with the
increase in sales over the years. Current ratio for the company is
very comfortable at 2.1. This indicates healthy liquidity for the
company. 32. Financial RatiosDebt to Equity ratio of the company is
comfortable. Itprovides room for increasing leverage to achieve
growth inthe coming years.Fixed assets ratio has decreased due to
lower capacityutilization. We expect this ratio to increase going
forward.Despite the drop in profits for FY 2009 the return
ratioslook healthy for PML.Debtors days & Inventory turnover
days are pretty healthyfor PML.Interest coverage ratio for the
company has declined overthe years. We believe that going forward
the ratio should bequite comfortable as the company had suffered
from hugeforex losses during the year.Profitability margins for the
company should improve goingforward due to better utilization of
fixed assets & due tocontributions coming in from the high
margin US markets. 33. Management team 34. Key PlayersHimanshu Baid
- Himanshu Baid is currently Promoter andManaging Director in Poly
Medicure Limited from 20thSeptember 1995 till date for last 12
years.Mr Baid, after completing his BE, joined Philips in
Germanywhere he gained vital experience in international trade. His
stintin Philips helped him understand the psyche of
internationalmarketers.He also worked as Chief Executive in Polycon
InternationalLimited making plastic moulded products and looked
after theday-to-day techno-commercial affairs of that Company
fromJune 1990 to October 1994.Himanshu worked as a Director in
Polycure Martech Limited &Jai Polypan Private Limited from
November 1994 to August1995.Rishi Baid - Rishi Baid, Executive
Director of the Company, age37 years, is B.S.M.E and M.S.M.E.
(Mechanical) from WestVirginia University, U.S.A.Prior to joining
Poly Medicure, he served Miles Pharma Inc. USA. 35. Share Holdings
patternThe promoters hold 47.55% stake inthe company. No share
pledgingactivity has been done by thepromoter. Promoter holding is
verycomfortable.Thepromoters havebeenmaintaining their holdings for
thepast several years. We believe thatthere can be substantial
amount ofindirect holding in the company.The
companyhadrecentlyannounced a 1:1 bonus issue afterwhichthe total
number ofoutstanding shares have gone up forthe
company.Institutions does not have anyholdings currently. We
believe that asthe company grows its revenues andthe market cap
improves, institutionswill be taking stakes in the company. 36.
Best Price to Buy 37. Buying strategy Post the split, the stock has
showed strong signs of strength and has been quick to rebound. We
believe thatthere could be a consolidation at the current levels
for a while. Also, the stock has a very strong support at around 90
levels and a range of 88 to 92 can be a very goodsecond entry point
in the counter. Hence, we advise a 2 phase buying strategy one at
the current levels and the other between 88and 92 levels. 38.
Challenges / Risks involved 39. Challenges / Risks
involvedFollowing are some of the key risks that could derail our
estimates andexpectations Raw material prices Plastic granules is
the major raw material requiredby the company. Other major raw
materials required by the company arealso plastic based products.As
we know that plastic prices are based on crude oil prices, any
increase incrude prices can adversely affect the profitability of
the company.Rupee Appreciation Currently, the company derives 75%
of itsrevenues by way of exports. Any appreciation in rupee can
have a negativeimpact on the earnings of the company.However, the
fact that the company imports 70% of its raw materialprovides a
natural hedge to the company to a huge extent. Also, the shareof
domestic revenues has been on a constant rise.Small Players The
company operates in business which has a lot of smalland
unorganized players that provide a competitive threat to the
company.However, the industry is witnessing a increase in market
share of organizedplayers and this augers well for a company like
Poly Medicure. 40. Building trust through extensive research on
emerging businesspotential HBJ Capital 41.
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otherperson. Persons into whose possession this documentmay come
are required to observe these restrictions.This material is for the
personal information of theauthorized recipient only.The
recommendation made herein does not constitute an offer to sell or
solicitation to buy any of the securities mentioned. No
representation can be made that recommendation contained herein
will be profitable or that they will not result in loss.
Information obtained is deemed to be reliable but do not guarantee
its accuracy and completeness. Readers using the information
contained herein are solely responsible for their action.HBJ
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hold positions in the companies /stocks mentioned herein. 43. THANK
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