BEST SMALL CAP COMPANY
Strides Acolab
Innovative business strategy can take an institution a long way. This is how Strides Acolab, which provides cancer drugs to US pharmaceutical giant Pfizer, made inroads in a competitive global pharma market.
Revenue streams from anti-retrovirals, tuberculosis and malaria (ATM) drugs were hitting a plateau amid stronger regulation and competition. The trick was to focus on more specialised businesses, and Strides picked injectable drugs as a core focus.
This was going to be a challenge since it required a lot of investment, complex technology and a long lead time to manufacture. But using its steady ATM revenue the company funded the research and development required to lift the injectables business off the ground.
It is now able to take advantage of the supply shortage of this business in the US, where the few competitors that do exist continue to struggle with compliance issues with medical regulators such as the US Food and Drug Administration.
“In the last two three years they invested in technology that is very difficult to replicate. And they maximised the supply and demand dynamics very well,” said an equity research analyst.
The injectables business has been so successful that Pfizer may purchase Strides’ injectibles-medicine unit, called Agila Specialties, according to news reports in August.
BEST MEDIUM CAP COMPANY
Wockhardt
It’s been a remarkable turnaround for pharmaceutical drugs maker Wockhardt, which just three years ago was forced to restructure debt in 2009 and sell non-core businesses in nutrition and animal health drugs.
“The company was in a financial mess and it came out of it by focusing on their core pharma products,” said a Mumbai-based equity analyst.
Wockhardt’s net profit jumped 254% in the second quarter of India’s fiscal year thanks to successful launches of its respiratory and diabetes drugs. It also received seven approvals for new drugs, of which four are made with advanced technology in the US market.
Revenue in its US business, which comprises of 49% of the company’s total sales, rose 47% compared to last year and 26% in the UK. The drastic improvement in cash flows has helped Wockhardt to pay off foreign currency and domestic debt. Such improving fundamentals ensured that its shares soared by 533% between the beginning of 2012 and early December.
The company now plans to release 10 new products every year in the US. Emkay Global Financial Services recommends investors buy this stock as it expects US sales to rise 21% each fiscal year until 2014, led by niche drugs such as Flonase and Comtan that have a US$90 million market.
BEST LARGE CAP COMPANY
Larsen & Toubro
India’s sluggish economic growth was going to make 2012 a difficult year. Engineering and construction conglomerate Larsen & Toubro could have easily taken a big hit due to a glut in infrastructure spending and delayed projects, tight availability of credit and a volatile rupee.
Despite the slow investment cycle, the company was still able to boost profit by completing more projects and increasing the amount of construction orders. It was able to win new business worth INR209 billion in the three months since July, which was a 30% increase compared to the same period in the previous year.
“They focused on quality by maintaining thorough checks, even as they bid aggressively,” says an equity research analyst. “They booked projects from better customers which helped them sail through the tough times.”
The company is also setting its sights overseas in countries such as the Middle East, Turkey and Brazil to make up for weak growth in India. It’s aiming to boost foreign market sales to a quarter of total revenue by 2016.
Larsen’s net profit rose 15% in the second quarter of India’s fiscal year to INR9.15 billion. The company is also expecting revenue and orders to rise as much as 20% by the end of March 2013 amid hopes that government reforms will boost economic activity. The stock rose 59% from January to December 3.
BEST EXECUTIVE
Aditya Puri, CEO, HDFC Bank
Aditya Puri has a lot to do with the fact that HDFC Bank remains a top stock pick for Indian bank analysts such as Credit Suisse, Morgan Stanley and CLSA.
Concern is mounting that non-performing loans are rising at an unhealthy rate on Indian bank balance sheets. Private and public sector banks are struggling to meet Basel III requirements and are grappling with a rising risk of default from corporations and state governments.
But Puri, who has nearly four decades of banking experience, has enforced a system of controlling loan losses to help the bank steer clear from accumulating an excessive amount of non-performing assets (NPA).
Loan loss provisions have fallen 20% in the past year to INR2.9 billion, which is the lowest across India’s banking sector. Less than 1% of its loan book is taken by bad loans, compared to the 4.2% industry average.
“Especially in the difficult macro environment, the NPAs have been managed well. He’s put in good risk management practices,” says an equity analyst.
Credit Suisse forecasts that HDFC will achieve the highest return-on-equity (ROE) of 20% among the private banks, compared to ICICI Bank’s 13%. HDFC’s ROE is expected to hit 21.3% by the end of fiscal year 2014, widening the gap between it and ICICI Bank.
The stock is up 53% so far this year, outperforming the Bombay Stock Exchange’s 36% rise.
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