Parabolic Drugs is the new pharma stock in our portfolio, and we are happy to become their shareholders. The company recently did an IPO at Rs 75, however we have started buying from the secondary market at current price of Rs 60.
After learning about their growth plans from their IPO document and their management, we feel confident about the growth prospects of Parabolic Drugs. We understand that they have confirmed order book from various international pharma companies to grow sales by about 40% and net profits should also increase in a similar range.
This is a profitable pharma company (that’s important for us) with high growth ahead (very good). We estimate that at Rs 60, its available at about FY11 PE of 8, which is attractive valuation for a mid-size pharma company with strong order book.
This stock has come down at 60 from IPO of 75. Due to the price fall after IPO, we believe many early investors are not sure about the company’s prospects, or maybe they now want to wait and watch. However, this is an opportunity. Pharma stocks are anyway defensive, and CRAMS space is poised for major growth, where Parabolic looks strong. One can buy this company’s stock gradually – that’s what we are doing.
Our Recommendation: Buy and hold for 2-3 years. The downside is less from here and upside looks big. If the order book remains strong and growth plans are executed, this company’s stock price can grow 3 times in next 3 years, supported by a lot of participation from Financial Institutions.
Reference: http://www.moneycontrol.com/news/press-release/parabolic-drugs-q1-pat3629-to-rs-1053-cr_471573.html
