Poly Medicure

Posted at March 2, 2010 written by Ayush

Poly Medicure is one of our favourite small cap stock which has carved out a niche for itself and has grown well over the last few years.

The company is the one of the biggest exporter of IV Safety Cannulae and other healthcare disposable products. This business segment is always growing and with development of better medical facilities, this segment should grow faster.

Few worthy points:

The company has grown at a CAGR (Compounded annual growth rate) of 30.75% over last 10 years. (From turnover of 10 Cr in FY 2000 to 112.22 Cr turnover in FY 2009)
The company is expected to grow at 20% YOY (Year on year) for next 2-3 years. This year the company is expected to do a turnover of 135 Cr with a net profit of 15 Cr, thus implying an EPS of 27.
The CMP of 200 discounts the immediate EPS of 27 by just 7.5 times.

The last two quarters have been very good due to the backward integration efforts of the company done in the last few years and hence the company may be able to sustain operating margins around 20%.

Recent Developments

The company has won series of patent infringement cases against major B Braun, after which the company is free to sell the advanced IV Safety Cannulae with the inbuild safety feature (http://www.expresshealthcare.in/201002/market26.shtml). This product has potential to sell at a very remunerative price in the developed nations.
The company has been strengthening its sales network on the domestic front and tying up with major hospitals.
The company is looking to expand its capacities and targets to double turnover in next 3 years. For they same they are also looking to put up a new factory.

Challenges:

Being a high volume low price product, the scaling up of the business is not easy. The company has been trying to develop new products to overcome the same.

Here is a company with strong financials, good business model, high margins, good return on equity, good cash flow yet available at less than 8 PE.