Started in 1996, Deccan Health Care Limited is Hyderabad based company engaged in developing, manufacturing and marketing of healthcare products. The company offers premium range products nutraceutical, cosmeceutical and Ayurveda products under the brand name 'Be Young' and 'Stay Young'. The Company's product has a comprehensive range of products (more than 1,500 products). These products are used for various purposes such as hair care, skin care, heart care, immunity building, etc. The company offers a long-chain omega-3 fatty acid, joint health nutrients, diacerein, antioxidants, immune enhancing components, skin aging products, instant energy drinks, and calcium supplements; and a formula for males. The company supplies their products in various forms such as tablets, capsules, gel, liquids, ointments, powder, pastes, etc. Deccan Health Care also has set up online B2C e-commerce portals BeYoungStore.com and StayYoungStore.com to sell its products directly to the customer. The company has more than 140 distributors and around 6100 marketing agents. As of March 31, 2018 Company has 160 employees at the manufacturing facility and registered office. As per financial performance, Deccan has posted total income/net profits of Rs 16.18 cr. / Rs. 3.54 cr. (FY16), Rs 29.39 cr. / Rs. 9.54 cr. (FY17) and Rs 39.76 cr. / Rs. 12.69 cr. (FY18). For upto Q1 of FY19, company has posted net profit 2.46 cr. with total income of 8.59 cr. So the company has shown very high growth rate since FY16. Trade receivable are 14.65 Cr for FY18 which is around 37% of FY18 total earnings and same was around 63% for FY17 total earnings, which is very high for any industry and it seems to increase sales, company is giving more credits to its distributors. For last three fiscals, it has posted an average EPS of Rs 8.81 and an average RoNW of 38.77%. Issue is priced at a P/BV of 3.47 on the basis of NAV of Rs. 28.84 as on 30th June 2018. If we consider latest earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 16 and as per FY18 earnings P/E is around 12. So issue fully priced as per FY19 future earnings. As per DRHP company has shown Zydus Wellness Limited as listed peer and this stocks is currently trading at P/E of 35.58 (as on 10.12.18). But Zydus can't be strictly compared with Deccan with size and brand value. On BRLM's front, for Pantomath Capital Advisors Private Limited this is the 75th IPO in last three fiscals and from last 10 IPOs, all opened above issue price with 1% to 8% premium on the day of listing. As of now, from last 10 IPOs, 3 are trading below issue price and remaining above issue price. ( As on 11.12.18 ) Company has shown good results in last three fiscals, RoNW is 38.77% and issue looks fully priced with respect to current earnings. But higher trade receivables raises concerns. Performance of BRLM is good. So we give NEUTRAL rating to this SME IPO.
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