Lincoln Pharmaceuticals Ltd – CMP – 632
Our View: Buy
Fundamental Grade : B Grade (Good Safety)
Brief about the company:
Lincoln Pharmaceuticals Limited (LPL) is engaged in the business of manufacturing, marketing and distribution of pharmaceutical products. Lincoln Pharmaceuticals Ltd. has a strong global presence in over 60 countries, including Africa, Central America, and Southeast Asia. The company is gradually expanding its presence in more countries and has obtained product registrations in key regions such as East and West Africa, South East Asia, and Latin America.
Focus of the company shifted from domestic contract manufacturing business to exports business in FY17 leading to higher margins in recent years.
Performance during Last 5 years:
Revenue grown at a CAGR of 7% and profit grown at a CAGR of 16% during past 5 years. Whereas share price reported CAGR return of 21%during this period. Return on equity for the past 5 year is around 17%.
Future Outlook:
The company has successfully completed multiple expansion projects and commercial production is anticipated to commence in the near future. The Cephalosporin plant is expected to make a significant contribution to the company’s sales, with an estimated revenue of around Rs. 150 crore over the next three years. From the current 60, the company aims to expand its export network to more than 90 countries. The company received approval from Australia’s Therapeutic Goods Administration (TGA) and the EU Good Manufacturing Practices (GMP) approval. This will give necessary impetus to its growth ambitions. The company is targeting to achieve 750 Cr turnover by FY 2026.
Valuation
At CMP, the stock is trading at PE of around 15.7 and P/B of around 2.32 which provides reasonable safety at current market. Further, the market capitalization is at 20 time cash flow which is also reasonable considering the growth outlook of 15% CAGR in revenue growth and 20% CAGR in profit growth during next 3 years. The company had extended Intercorporate Loan at 83 Cr which needs to be monitored. Increase in such loans to be carefully watched. Overall, even after recent run-up in stock price, one can consider buying into the stock at CMP.