MULTIBAGGER STOCK RECOMMENDATION - FDC

FDC  LIMITED
 BSE: 531599    NSE: FDC   CMP :101.20

FDC Limited [ Food, Drugs and Chemicals ] having a Marketcap of Rs.1875 crores has its Corporate Office at Aurangabad and 6 manufacturing units at Mumbai, Roha, Waluj, Goa, Bddi and Sinar. FDC exports its products to USA, UK, South Ameirica, Ukraine, Myanmar and Afganistan. The Company’s subsidiaries include FDC International Limited and FDC Inc. Its joint venture entity includes Fair Deal Corporation Pharmaceuticals SA (Pty) Ltd.

The Company’s products can be broadly classified under three broad categories :

• Therapeutic - Anti fungal, anti-anemic, anti-diabetic, anti-intestinal, anti-hemorrhagic, anti-oxidants and anti-spasmodic, Ophthalmics, Orthopaedics, Nutraceuticals etc.

• Food – Antioxidants, Vitamins and Nutraceuticals [Mum Mum I, an infant milk substitute is doing great]

• Bulk Drugs - Active Pharmaceutical Ingredients like Albuterol Sulfate, Cinnarizine, Fluconazole etc.

Shareholders of FDC know the potential of FDC – Sometime in April 2010, the company came up with an offer to buy back 8650000 shares .65/= per share but the company was not successful in buying back the shares as envisaged since the market price was higher than the Offer Price.

Research & Development - As is known the future of a pharma company can be assessed not only based on its current basket of products, filing of successful patents but also on the annual R&D spend. Well, FDC spends less than 5 per cent of its total turnover on R&D – in FY2008-09, it spent 3.56 per cent and in FY2009-10 it spent 2.92 per cent of its total revenues on R&D.

Is FDC an Indian MNC in the making ? Growth rates match that of great MNC’s like Pfizer : Five year top line and bottom line CAGR was 13.35 and 16.49 per cent. [Pfizer’s was 13.28 and 16.57 per cent] Total Revenue in FY2010 stood at 681 crores and PAT stood at Rs.148 crores.

FDC Limited is a zero debt company generating strong ROE and ROCE numbers over the last 3 fiscals : ROE from FY2008 through FY2010 were 18%, 21% and 31 per cent respectively. ROCE in stated fiscals was 22.26 and 38 per cent respectively. FDC has excellent working capital on a y-o-y basis and PAT margins in FY2010 stood at 22.55 per cent. Promotor’s, FII’s and DII’s stake in FDC is 66.35,.3.86 and 9.38 per cent respectively. Company’s Dividend yield stands at 1.98 per cent.

Conclusion : At a PE of 12.5 the shares of FDC Limited are trading at around Rs.101.20 per share and as such it is a reasonably attractive buy if we consider some good pharma companies quoting at PE in excess of 20.00