Eye on Lincoln Pharmaceuticals as a growth stock
06-06-2016 • About Lincoln Pharmaceuticals (
$LINCOPH) • By InTwits
Have you thought about Lincoln Pharmaceuticals as a growth stock? Its revenue performance, profitability and healthy financial model stands it out vs. other public companies on the market.
Growth story
Lincoln Pharmaceuticals showed growth in the last financial year. The company's revenue surged on 50.4% in FY2016. In addition to revenue Lincoln Pharmaceuticals also keeps delivering EBITDA growth. It was 50.7% in FY2016
In the longer period Lincoln Pharmaceuticals showed fast revenue growth of 27.1% from FY2013 to FY2016 annually. EBITDA surged on 38.7% from FY2013 to FY2016 annually.
Lincoln Pharmaceuticals ($LINCOPH) financials for the last 5 years
| mln. INR | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Revenue | 1,876 | 1,947 | 2,113 | 2,661 | 4,002 |
|---|
| Revenue growth, % | | 3.8% | 8.5% | 25.9% | 50.4% |
|---|
| SG&A, % | | | | | |
|---|
| EBITDA | 139 | 156 | 211 | 276 | 415 |
|---|
| EBITDA growth, % | | 11.9% | 35.5% | 30.7% | 50.7% |
|---|
| EBITDA margin, % | 7.41% | 7.99% | 9.98% | 10.4% | 10.4% |
|---|
| Net Income | 51 | 97 | 107 | 150 | 237 |
|---|
| Net Income margin, % | 2.73% | 4.96% | 5.04% | 5.64% | 5.92% |
|---|
| |
| CAPEX | 171 | 188 | 39 | 39 | 337 |
|---|
| CAPEX/Revenue, % | 9.12% | 9.65% | 1.85% | 1.48% | 8.43% |
|---|
| Debt | 655 | 756 | 681 | 762 | 762 |
|---|
| Cash | 120 | 94 | 50 | 115 | 126 |
|---|
| Net Debt/EBITDA | 3.8x | 4.3x | 3.0x | 2.3x | 1.5x |
|---|
| |
| ROIC, % | 8.4% | 7.8% | 10.0% | 12.4% | 17.5% |
|---|
| ROE, % | 6.5% | 11.4% | 11.3% | 14.3% | 18.9% |
|---|
Profitability and return on investment
EBITDA margin hasn't changed. It stayed at 10.4% in FY2016. If we look for the longer period the company's EBITDA margin surged on 2.40 pp from 8% in FY2013 to 10.4% in FY2016.
We call Lincoln Pharmaceuticals an attractive growth stock as together with the growth it delivers high ROIC at 17.5%. During the last three years it surged - it was 7.81% in FY2013. It's average ROIC for the last three years was 13.3%.
The company's Net Income margin increased on 0.300 pp from 5.60% to 5.90% in FY2016. If we look for the longer period Lincoln Pharmaceuticals's Net Income margin surged on 0.900 pp from 5% in FY2013 to 5.90% in FY2016.
Lincoln Pharmaceuticals operates at ROE of 18.9%. Average ROE for the last three years was 14.8%.
Capital expenditures (CAPEX)
To fuel this fast growth the company had to invest in CAPEX.In FY2016 Lincoln Pharmaceuticals had CAPEX/Revenue of 8.43%. Lincoln Pharmaceuticals showed big decline in CAPEX/Revenue of 1.22 pp from 9.65% in FY2013 to 8.43% in FY2016. It's average level of CAPEX/Revenue for the last three years was 3.92%.
Leverage (Debt)
The company has medium debt level at 1.5x Net Debt/EBITDA to maintain high growth. If we look for the longer period leverage dropped on 2.72x from 4.25x in FY2013 to 1.53x in FY2016.
Valuation vs. comparable companies
The market closed today at 7.0x EV/EBITDA for Lincoln Pharmaceuticals which is 72.9% lower than 25.7x Pharmaceuticals peer group avearge calculated on the basis of 266 companies. At the end of trading day today Lincoln Pharmaceuticals traded at 9.5x P/E which is 81.9% lower than 52.5x Pharmaceuticals peer group avearge calculated on the basis of 22 companies.
For capital intensive compnanies it's worth taking a look at EV/(EBITDA-CAPEX) multiple. The market closed today at 37.0x EV/(EBITDA-CAPEX) for Lincoln Pharmaceuticals which is 2,200% higher than 1.6x Pharmaceuticals peer group avearge calculated on the basis of 16 companies.
Peers in Pharmaceuticals
Below we provide Lincoln Pharmaceuticals benchmarking against other companies in Pharmaceuticals industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Top 5 |
|---|
| Alembic Pharmaceuticals ($APLLTD) | | 3.7% | 22.6% | 10.4% | 53.1% |
| Torrent Pharmaceuticals ($TORNTPHARM) | | 17.7% | 32.2% | 13.6% | 42.4% |
| Natco Pharma ($NATCOPHARM) | | 26.1% | 11.9% | 11.7% | 38.3% |
| Mangalam Drugs & Organics ($MANGALAM) | | -18.2% | -2.1% | 79.8% | 33.7% |
| Cipla ($CIPLA) | | 18.1% | 21.5% | 10.8% | 22.9% |
| |
|---|
| Median (33 companies) | 27.7% | 14.9% | 13.7% | 8.6% | 11.0% |
|---|
| Lincoln Pharmaceuticals ($LINCOPH) | | 3.8% | 8.5% | 25.9% | 50.4% |
Top companies by Gross margin, %
| FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Top |
|---|
| Dr.Reddy'S Laboratories ($DRREDDY) | | 52.1% | 57.4% | 57.6% | 59.6% |
| Omega Laboratories ($OMEGALAB) | 0.0% | 0.0% | 0.0% | 0.0% | 0.0% |
| |
|---|
| Median (2 companies) | 46.9% | 26.1% | 28.7% | 28.8% | 29.8% |
|---|
Top companies by EBITDA margin, %
| FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Top 5 |
|---|
| Divi'S Laboratories ($DIVISLAB) | 37.2% | 38.2% | 40.2% | 37.4% | 37.5% |
| Hester Biosciences ($HESTERBIO) | | | | 32.9% | |
| Sun Pharmaceutical Industries ($SUNPHARMA) | 40.8% | 44.3% | 44.9% | 29.2% | 30.6% |
| Natco Pharma ($NATCOPHARM) | 21.5% | 23.2% | 24.9% | 26.2% | 24.1% |
| Dr.Reddy'S Laboratories ($DRREDDY) | 25.8% | 22.9% | 25.1% | 23.2% | 25.8% |
| |
|---|
| Median (53 companies) | 12.9% | 13.4% | 15.0% | 12.1% | 16.1% |
|---|
| Lincoln Pharmaceuticals ($LINCOPH) | 7.4% | 8.0% | 10.0% | 10.4% | 10.4% |
Top companies by CAPEX/Revenue, %
| FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Top 5 |
|---|
| J.B.Chemicals & Pharmaceuticals ($JBCHEPHARM) | 10.0% | 5.8% | 6.0% | 6.2% | 15.9% |
| Claris Lifesciences ($CLARIS) | 58.1% | 42.9% | | 103.1% | 15.8% |
| Marksans Pharma ($MARKSANS) | 1.5% | 1.5% | 0.8% | 4.6% | 14.8% |
| Natco Pharma ($NATCOPHARM) | 24.4% | 16.3% | 14.4% | 14.1% | 13.8% |
| Sun Pharmaceutical Industries ($SUNPHARMA) | 8.9% | 7.5% | 5.7% | 8.6% | 12.2% |
| |
|---|
| Median (26 companies) | 7.7% | 7.5% | 5.8% | 6.2% | 8.3% |
|---|
| Lincoln Pharmaceuticals ($LINCOPH) | 9.1% | 9.7% | 1.9% | 1.5% | 8.4% |
Top companies by ROIC, %
| FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Top 5 |
|---|
| Alembic Pharmaceuticals ($APLLTD) | 27.5% | 29.1% | 41.5% | 35.7% | 62.1% |
| Torrent Pharmaceuticals ($TORNTPHARM) | 26.4% | 30.5% | 33.2% | 19.7% | 44.2% |
| Abbott India ($ABBOTINDIA) | 29.6% | 26.9% | 30.5% | 34.2% | 34.1% |
| Divi'S Laboratories ($DIVISLAB) | 30.6% | 30.4% | 32.3% | 30.5% | 31.9% |
| Jenburkt Pharmaceuticals ($JENBURPH) | 34.1% | 29.0% | 32.4% | 35.3% | 31.4% |
| |
|---|
| Median (56 companies) | 14.0% | 13.4% | 15.6% | 13.3% | 15.9% |
|---|
| Lincoln Pharmaceuticals ($LINCOPH) | 8.4% | 7.8% | 10.0% | 12.4% | 17.5% |
Top companies by Net Debt / EBITDA
| FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Top 5 |
|---|
| Jubilant Life Sciences Limited ($JUBILANT) | 4.0x | 3.5x | 3.5x | 6.4x | 3.2x |
| Claris Lifesciences ($CLARIS) | 1.9x | 1.1x | 1.8x | 3.2x | 2.9x |
| Themis Medicare ($THEMISMED) | | 7.9x | 0.0x | 0.0x | 2.9x |
| Glenmark Pharmaceuticals ($GLENMARK) | 2.7x | 2.1x | 2.2x | 2.5x | 2.2x |
| Dishman Pharmaceuticals & Chemicals ($DISHMAN) | 3.6x | 2.6x | 2.3x | 2.9x | 2.1x |
| |
|---|
| Median (40 companies) | 1.5x | 1.3x | 0.2x | 0.0x | 0.1x |
|---|
| Lincoln Pharmaceuticals ($LINCOPH) | 3.8x | 4.3x | 3.0x | 2.3x | 1.5x |
