The Hindu Business Line : Signs of value buying seen in RPG Life Sciences

According brokers and analysts, the market valuation of the stock had taken a dip after it created its 52-week high on August 18 last. "It seems the stock had run up fast following an excellent operational performance in the first quarter of this fiscal and now after a bit of consolidation is trying to move forward," said Mr Mathew Easow, a market analyst.

The quarter to June 30, 2005, the company had shown a growth in sales of 38.26 per cent at Rs 43.62 crore. However, the net profit had jumped by 589.47 per cent as it closed down its loss making Pimpri facility, which was taken on lease from Hindustan Antibiotics.

Mr Pradipta Mahapatra, Chief Executive for Technology sector for the RPG group, told Business Line that the margins and sales are likely to grow significantly because of the new focus of the company for a range of specialist products, particularly in cardiology, nefrology, diabetology, anti ulcerant and pain.

The Rs 10-crore USFDA approvable facility at Ankleshwar would be ready by third quarter of this fiscal, he said. The global joint marketing arrangements for Cyclosporine are also expected to be firmed up this fiscal. "These would boost exports significantly, Mr Mahapatra added.

The company is negotiating with Hindustan Antibiotic to find a solution to the problem of losses of around Rs 5 core annually on the lease arrangement still being incurred and will continue till 2015. "It has been encouraging so far, we hope to find a solution soon," Mr Mahapatra said.

According to Mr Devarsh Vakil of Anagram Stockbroking, based on June quarter results, the annualised EPS for the current fiscal may grow to Rs 21. "This at today's closing price of Rs 120, the stock is trading at an attractive P/E of 5.7 on the annualised expected earnings of Q1 FY06," he added.

According to him, company's alliances with European and Canadian partners have the potential to grow further. Company's APIs, supported by patented products like Risperidone (patented in US and some key EU countries) and niche products such as Quinfamide and Diphynoxylate HCL, are expected to do well in the domestic and export markets.

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