Recommendation Review: Poly Medicure

We had recommended Poly Medicure in DSIJ Vol. 28, Issue No. 13 (dated June 16, 2013), when it was trading at Rs 504 (i.e. Rs 252 after adjusting for the bonus). The company has given bonus shares in the ratio of 1:1 to its shareholders on July 10, 2013. The counter has seen considerable appreciation in the past four months, and is currently trading at Rs 341, giving a handsome return of 35 per cent over our recommended price.

Poly Medicure is a medical devices company based in Faridabad, Haryana. It has three manufacturing units located in Ballabgarh (Units I and II) and Haridwar (Unit III). Unit II is an export-oriented set-up and in fact, is the only USFDA-approved unit in the medical devices sector in the country. The company exports its products to more than 80 countries, which generate 70 per cent of its revenues.

In Q2FY14, it has once again posted a robust performance, with its revenues boosted by almost 27 per cent to Rs 79.55 crore against Rs 62.36 crore in Q2FY13. The company has managed to cut down its cost considerably to 78.55 per cent of the total revenue in the said quarter against 90.94 per cent of the total revenue in the same period last year. This has helped its EBITDA to move up by almost 137 per cent to Rs 21.19 crore during this quarter. The EBITDA margin expanded by 1230 basis points to 26.64 per cent during Q2FY14. The company's net profit showed a robust growth of almost 217 per cent to Rs 11.04 crore in Q2FY14 against Rs 3.48 crore during same period last year.

The growth spurred by the expected rise in export orders and capacity expansions have augured well for the company and its investors. We recommend booking profits in this stock in light of the recent volatile moves seen in the domestic market.