Reversal on Divi's Lab!!! A potential Uptrend?????
Hello
friends. Welcome to Richer Investor. Today we are gonna review a stock which
has been pretty beaten up in the recent past. The stock that we are talking
about is Divi’s Lab. In late December 2016 the USFDA issued a Form 483 on the
company’s AP unit.
Well what is a form 483?
An FDA Form
483 is issued to firm management at the conclusion of an inspection when an
investigator(s) has observed any conditions that in their judgment may
constitute violations of the Food Drug and Cosmetic (FD&C) Act and related
Acts. FDA investigators are trained to ensure that each observation noted on
the FDA Form 483 is clear, specific and significant. Observations are made when
in the investigator’s judgment, conditions or practices observed would indicate
that any food, drug, device or cosmetic has been adulterated or is being
prepared, packed, or held under conditions whereby it may become adulterated or
rendered injurious to health.
After this
the stock took a huge beating and went down from 1100 levels and took a nose
dip to 750 levels. The stock fell further in Jan to 670. However it is showing recovery
mode ever since. So what should we do about this stock. Before we come to any
conclusions let’s look at the facts.
If you look
at the balance sheet of Divis Lab you can observe that it is sitting on a huge
pile of reserves I.e Rs 4297.05 crores and the total networth of the company is Rs 4350.14 crores. Whereas its debt is not even 1% of that which is Rs 41.89 Crores.
The company has good financials. The equity is well enough to finance the
company’s operations.
Looking at
the P/L account shows a very interesting picture about the company. The sales
for the company in the year 2015-16 has been Rs 3742.48 Crores of which Profit is
Rs 1107.69 Crores. That’s almost 30% of revenue. That’s something. Now even in the current
year if you see the results, the company has already achieved Rs 793.98 Crores.
The real challenge would be, whether the company can sustain the profit for the
current quarter after receiving a Form 483 from USFDA. If they do I am sure the
stocks potential is very much high.
The most
important thing as of now is to see how the Company deals with the observations
by USFDA. If things go well for Divi’s Lab and they get a clean chit then the
price can be expected to come back to 1300 levels.
Thank you for joining us. Have a nice day.
- Richer Investor.
Written by Roger Vins (CA, MCom)
Disclosure:
Financial interest in the company is not greater than 0.1% of Share Capital.
The author is not a research analyst.
Written by Roger Vins (CA, MCom)
Disclosure:
Financial interest in the company is not greater than 0.1% of Share Capital.
The author is not a research analyst.
Thanks very good anylasis will cheack fda obersavation which is got during both of thease plant but it directly impact of 30-35% of revenue why we should look lupin which has clear all observation yesterday
ReplyDelete