Eye on Venus Remedies as a growth stock

06-06-2014 • About Venus Remedies ($VENUSREM) • By InTwits

Pay attention to Venus Remedies as a growth stock. It showed noticeble revenue performance in the last years among with attractive profitability and financial model.

Growth story

Venus Remedies showed fast growth in the last financial year. Venus Remedies's revenue surged on 15.6% in FY2014. The growth also happened in EBITDA of 15.1% for the same period.

In the last 3 years Venus Remedies showed fast revenue growth of 14.3% from FY2011 to FY2014 annually. EBITDA surged on 15.3% from FY2011 to FY2014 annually.

Venus Remedies ($VENUSREM) financials for the last 5 years

mln. INR	FY2010	FY2011	FY2012	FY2013	FY2014
Revenue	5,449	3,631	4,088	4,686	5,416
Revenue growth, %		-33.4%	12.6%	14.6%	15.6%
SG&A, %
EBITDA	755	903	1,031	1,201	1,382
EBITDA growth, %		19.6%	14.2%	16.5%	15.1%
EBITDA margin, %	13.8%	24.9%	25.2%	25.6%	25.5%
Net Income	396	462	471	573	643
Net Income margin, %	7.26%	12.7%	11.5%	12.2%	11.9%
CAPEX	512	965	950	1,040	947
CAPEX/Revenue, %	9.40%	26.6%	23.2%	22.2%	17.5%
Debt	1,494	1,869	2,203	2,248	2,501
Cash	15	31	10	33	7
Net Debt/EBITDA	2.0x	2.0x	2.1x	1.8x	1.8x
ROIC, %	20.0%	18.3%	15.7%	14.9%	14.4%
ROE, %	25.5%	22.7%	17.3%	16.7%	15.3%

Profitability and return on investment

EBITDA margin declined slightly from 25.6% in FY2013 to 25.5% in FY2014. In the longer period the company's EBITDA margin increased slightly on 0.600 pp from 24.9% in FY2011 to 25.5% in FY2014.

We call Venus Remedies an attractive growth stock as together with the growth it delivers high ROIC at 14.4%. During the last three years it dropped - it was 18.3% in FY2011. For the last three years the average ROIC was 15.0%.

Venus Remedies's Net Income margin decreased slightly on 0.300 pp from 12.2% to 11.9% in FY2014. If we look for the longer period Venus Remedies showed decline of 0.800 pp from 12.7% in FY2011 to 11.9% in FY2014.

Venus Remedies operates at ROE of 15.3%. Average ROE for the last three years was 16.4%.

Capital expenditures (CAPEX)

To this fast growth the company had to invest in CAPEX.The company's CAPEX/Revenue was 17.5% in FY2014. Venus Remedies showed big decline in CAPEX/Revenue of 9.09 pp from 26.6% in FY2011 to 17.5% in FY2014. It's average level of CAPEX/Revenue for the last three years was 21.0%.

Leverage (Debt)

Venus Remedies has medium debt level at 1.8x Net Debt/EBITDA to maintain high growth. In the last 3 years the company's leverage dropped on 0.23x from 2.04x in FY2011 to 1.80x in FY2014.

Peers in Pharmaceuticals

Below you can find Venus Remedies benchmarking vs. other companies in Pharmaceuticals industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.

Top companies by Revenue growth, %

	FY2010	FY2011	FY2012	FY2013	FY2014
Top 5
Granules India ($GRANULES)		-68.4%	37.6%	16.9%	43.4%
Marksans Pharma ($MARKSANS)		-66.6%	16.7%	23.3%	43.3%
Sun Pharmaceutical Industries ($SUNPHARMA)		-87.8%	39.9%	40.4%	42.4%
Torrent Pharmaceuticals ($TORNTPHARM)		-63.5%	22.7%	17.7%	32.2%
Abbott India ($ABBOTINDIA)		-46.4%	8.2%	8.7%	27.3%
Median (34 companies)		-47.7%	15.3%	15.0%	13.1%
Venus Remedies ($VENUSREM)		-33.4%	12.6%	14.6%	15.6%

Top companies by Gross margin, %

	FY2010	FY2011	FY2012	FY2013	FY2014
Top
Dr.Reddy'S Laboratories ($DRREDDY)	51.7%			52.1%	57.4%
Omega Laboratories ($OMEGALAB)			0.0%	0.0%	0.0%
Median (2 companies)	55.5%		46.9%	26.1%	28.7%

Top companies by EBITDA margin, %

	FY2010	FY2011	FY2012	FY2013	FY2014
Top 5
Sun Pharmaceutical Industries ($SUNPHARMA)	2.9%	34.3%	40.8%	44.3%	44.9%
Divi'S Laboratories ($DIVISLAB)	11.2%	38.1%	37.2%	38.2%	40.2%
Dr.Reddy'S Laboratories ($DRREDDY)	3.0%	21.7%	25.8%	22.9%	25.1%
Natco Pharma ($NATCOPHARM)	10.2%	21.3%	21.5%	23.2%	24.9%
Ipca Laboratories ($IPCALAB)	8.8%	20.0%	22.3%	22.6%	24.8%
Median (31 companies)	7.1%	16.9%	13.2%	13.4%	15.5%
Venus Remedies ($VENUSREM)	13.8%	24.9%	25.2%	25.6%	25.5%

Top companies by CAPEX/Revenue, %

	FY2010	FY2011	FY2012	FY2013	FY2014
Top 5
Granules India ($GRANULES)	0.9%	5.3%	8.8%	15.2%	24.3%
Dishman Pharmaceuticals & Chemicals ($DISHMAN)	16.3%	24.3%	8.4%	10.9%	21.6%
Shasun Pharmaceuticals ($SHASUNPHAR)	1.4%	4.3%	10.4%	15.2%	15.8%
Natco Pharma ($NATCOPHARM)	3.9%	20.0%	24.4%	16.3%	14.4%
Ipca Laboratories ($IPCALAB)	3.5%	10.3%	11.2%	8.3%	11.6%
Median (26 companies)	2.6%	7.4%	7.5%	6.5%	5.8%
Venus Remedies ($VENUSREM)	9.4%	26.6%	23.2%	22.2%	17.5%

Top companies by ROIC, %

	FY2010	FY2011	FY2012	FY2013	FY2014
Top 5
Alembic Pharmaceuticals ($APLLTD)			27.5%	29.1%	41.5%
Sun Pharmaceutical Industries ($SUNPHARMA)	15.6%	18.9%	24.8%	31.1%	35.0%
Marksans Pharma ($MARKSANS)	1.5%	-25.8%	-142.4%	34.9%	33.8%
Torrent Pharmaceuticals ($TORNTPHARM)	26.5%	22.3%	26.4%	30.5%	33.2%
Jenburkt Pharmaceuticals ($JENBURPH)	33.0%	43.6%	34.1%	29.0%	32.4%
Median (54 companies)	14.3%	14.6%	14.3%	14.2%	15.7%
Venus Remedies ($VENUSREM)	20.0%	18.3%	15.7%	14.9%	14.4%

Top companies by Net Debt / EBITDA

	FY2010	FY2011	FY2012	FY2013	FY2014
Top 5
Ind-Swift Laboratories ($INDSWFTLAB)	3.9x	4.6x	5.5x	16.1x	19.5x
Shasun Pharmaceuticals ($SHASUNPHAR)	3.5x	4.5x	2.8x	4.5x	6.0x
Jubilant Life Sciences Limited ($JUBILANT)	4.0x	5.3x	4.0x	3.5x	3.5x
Kopran ($KOPRAN)	6.6x	6.0x	4.5x	3.0x	3.0x
Granules India ($GRANULES)	2.3x	2.0x	2.2x	2.4x	2.7x
Median (43 companies)	1.5x	1.2x	1.2x	1.2x	0.4x
Venus Remedies ($VENUSREM)	2.0x	2.0x	2.1x	1.8x	1.8x

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