Recommendation From Pharmaceuticals & Banking Sectors
The scrips in this column have been recommended with a 15-day investment horizon in mind and carry high risk. Therefore, investors are advised to take into account their risk appetite before investing, as fundamentals may or may not back the recommendations.
SUVEN LIFE SCIENCES
CMP - Rs 191.85
BSE CODE 530239
Volume 117327
Face Value Rs 1
Target Rs 207 / 217
Stoploss Rs 178
Suven, a bio-pharmaceutical company, is engaged in designing, manufacturing and sale of bulk drugs and intermediaries. It derives major revenue from manufacturing (CRAMS) (95%). Under CRAMS, it develops and produces bulk drugs and intermediates under contract manufacturing services. Other is DDDSS (5%). Apart from India (8%), the company earns major part of its revenue from Europe (74.6%) and USA (10%) in FY17. Recently, the company secured product patents from Australia, Singapore, New Zealand and Europe meant for treatment of neurodegenerative disorders. The company is also working on high value, low volume eight to 10 molecules, which it expects to file by FY20E. On the financial front, the company posted robust Q4FY18 revenue and PAT growth of 30.6 and 80.7%, respectively. On a TTM basis, the topline and bottomline growth stand at 15% and 28.3%, respectively. The stock is trading at attractive valuation of 14.5x P/E as compared to its peers and is virtually debt-free. We recommend a BUY
AU SMALL FINANCE BANK
CMP - Rs 707.60
BSE CODE 540611
Volume 6823
Face Value Rs 10
Target Rs 775
Stoploss Rs 653
AU Small Finance Bank deals in wholesale banking, personal banking, insurance and retail loan related products and services. The bank was listed in July 2017 and has 306 branches across the country. It has launched various loan products in FY18 viz; SME loans, gold loans, 2W loans, consumer durable loans and home loans. On the financial front, the bank posted total income growth of nearly 57%, while the PAT growth remained moderate at 6.6% YoY in Q4FY18. Its AUM/ deposit growth came in at 20%/113% QoQ, while the AUM posted a growth of 49% YoY, driven majorly by retail and wholesale segments. The share of deposits too increased to nearly 51% of total liabilities as against 34% QoQ. The bank is expected to post NIM at 5.3% in FY19E on the back of lower cost of funds, which would in turn benefit the borrowers. Moreover, the bank has halted branch addition which would stabilise its C/I ratio. Further, the bank is expected to resolve 5-6 cases under SARFESI in the wholesale segment in FY19. As it is, fresh slippages were low and recoveries had increased in Q4FY18. We recommend a BUY.