Quest Laboratories Limited is engaged in the business of manufacturing of pharmaceutical formulations across a broad spectrum, including antibiotics, antimalarials, antispasmodics, anti-inflammatories, antiemetics, respiratory medications, diabetes treatments, antidepressants, and more. These formulations fall under the trademark 'Quest Laboratories Limited'. The company produces a variety of products, comprising ethical drugs, generic drugs, and over the-counter drugs (OTC). These products are available in various forms such as tablets, liquid orals, oral dry powders, oral powders (ORS), ointments, and external liquids. This comprehensive approach allows the Company to address a wide range of medical needs and preferences among patients. They currently have the manufacturing facility located at Plot No. 45, Sector III, Pithampur Industrial Area, Pithampur, Dhar - 454775, Madhya Pradesh, India. The total area of the facility is approximately 4,065 square meters. The manufacturing facilities are well equipped with the required facilities including machinery, other handling equipment’s to facilitate smooth manufacturing process and easy logistics. They endeavour to maintain safety in the premises by adhering to key safety norms, established through the internal health and safety manual, accompanied by regular safety meetings. The Company have been receiving sales orders from the private sector & government institutions on regular basis. This collaborative approach offers benefits to the purchasers, including cost efficiency through bulk production, capacity scaling, regulatory compliance, reduced lead times, risk mitigation, access to specialized technologies, geographical expansion, cost effective compliance, and resource optimization. The company has successfully bid for government tender contracts over the past few years, collaborating with major state and central government institutions and corporations The key raw materials utilized in the manufacturing operations encompass Active Pharmaceutical Ingredients (APIs) for the formulations, key starting materials, and intermediaries for the internally manufactured APIs. They also acquire other materials such as excipients, manufacturing consumables, lab chemicals, and packaging materials. Furthermore, the procurement extends to packaging materials sourced from vendors situated across different geographical locations. In the domestic market, the company procures raw materials primarily from Madhya Pradesh, Maharashtra, Himachal Pradesh, Telangana, Uttarakhand, and Gujarat. They strive to maintain strong relationships with suppliers across these regions to ensure a steady supply chain and the quality of the products. As per financial performance, Quest Laboratories Limited has posted total income / net profits of Rs 30.44 Cr / Rs 0.66 Cr (FY21), Rs 59.54 Cr / Rs 4.11 Cr (FY22), Rs 61.87 Cr / Rs 5.03 Cr (FY23) and Rs 62.18 Cr / Rs 7.75 Cr (upto Q3 FY24). So as per previous financials data, company has shown good growth. Company has posted an average EPS of Rs 3.70 and average RoNW of 32.28% for last three fiscals. Issue is priced at a P/BV of 4.59 as per NAV of 21.11 as on 31.12.23. If we attribute latest earnings of FY22, FY23 and annualised FY24 on fully diluted equity post issue, then asking price is at a P/E of around 38.72, 31.61 and 15.38 respectively, which looks fully priced. As per RHP, comparison between listed peers is shown in above table. On BRLM's front, Sherni Shares Limited is associated with this SME IPO and handled 24 SME IPOs in last 3 year. From last 10 SME IPOs, all opened above issue price or at par on the day of listing. As of now from last 10 SME IPOs, one is trading below issue price and remaining are trading above issue price. ( As on 09.05.24 ) As per financials, Quest Laboratories Limited has shown good growth, RoNW is 33.47% and P/E is respectively 38.72, 31.61 and 15.38 as per FY22, FY23 and annualised FY24 earnings. So, issue looks fully priced. Company is in business of manufacturing of pharmaceutical formulations across a broad spectrum, including antibiotics, antimalarials, antispasmodics, anti-inflammatories, antiemetics, respiratory medications, diabetes treatments, antidepressants, and more. BRLM performance is good. So, we give NEUTRAL rating for this IPO. Readers must consult a qualified financial advisor prior to making any actual investment decisions.
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