Recommendation Review: Poly Medicure

We had recommended Poly Medicure, a Small-Cap pharma company in DSIJ Vol. 28, Issue No 13 (dated June 16, 2013), when it was trading at Rs 504. We had recommended this scrip considering expectations of higher growth in the company on the back of a rise in export orders and capacity expansions. Also, in the backdrop of the volatility that Small-Cap counters we witnessing due to share pledging, this counter gave us a higher degree of confidence as there was no share pledging. Another factor which went in its favour was the high growth in revenues over the past six years.

Post our recommendation, the company issued bonus share in the proportion of 1:1, due to which the price has halved, but investors have received one share for every original share held. There was also a dividend of Rs 2 per share, which means that investors have pocketed a total of Rs 4 apiece, making for a dividend yield of around one per cent on the original recommended price.

In its Q1 results, the company reported 22 per cent growth in its Total Income to Rs 70.65 crore and its Net Profit doubled to Rs 9.54 crore. The EBITDA margins improved from 16 per cent to 27 per cent. The stock had tanked to the level of Rs 231 amid last month’s volatility, but has shown a good recovery. At the CMP of Rs 260, it is quoting three per cent higher from our recommended price. Together with the dividend, the stock has given four per cent returns so far. We advise investors to stay in the counter with a price target of Rs 297.