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The journey of the Gufic group started way back in the 1970s when Late Shri Pannalal Choksi imported a lyophilizer from the USA to produce lyophilized injections, making Gufic the first company in India to do so. Lyophilization has many benefits including enhanced product stability and shelf life. The market for lyophilized drugs has grown fast and almost 25-30% of the new injections are lyophilized and this is expected to continue to grow at a CAGR of 8-10%.
Over the years, Gufic combined its high-end lyophilization technology along with its Research and Development expertise to offer differentiated products targeted at Indian and international markets. Gufic is now the 3rd fastest growing pharma company in India. It has grown its annual lyophilization capacity from 60 lakh vials in 2007-08 to 480 lakhs in 2020-21. The Company is undergoing a capacity expansion which would boost its lyophilization capacity to 840 lakh vials a year.
The Domestic Formulations Business segment generated about 55% of the revenues for the Company in Fiscal Year 2021. They have 18 brands that generate more the 5 crore rupees of annual turnover. The management has guided 55-60% gross margins in this segment. Gufic is the first company to launch an indigenously manufactured Botulinum Toxin (for wrinkles and sagging skin) in collaboration with Prime-Bio, the USA under the brand name Stunnox. The Company has high expectations for the future of this product.
As for the International business, Gufic exports around 130+ products to 15+ countries globally, with around 150+ more products in the pipeline for registration. The major export markets are Germany, Russia, Africa, and the Middle East. This segment contributes about 15% of the total revenues.
Contract Manufacturing accounts for another 25% of the company’s revenue. Gufic offers CMO services to 70+ partners for more than 150 products spread across multiple therapy areas. The focus is on developing markets like Africa, Southeast Asia, Australia, Canada, and the Middle East.
Major upcoming capex will lead to further growth in India and export business. The combined capex planned in the Indore Unit-II facility and the Penem Block in Navsari is around 320 crore rupees.
So, what is our view on company valuation?
At 22 times P/E (TTM) ratio, Gufic seems to be fairly valued given the growth trends. The current valuation indicates a PEG ratio of around 1 time. The branded formulation business is expected to continue being a cash cow for the Company. Backward integration into API manufacturing can control the raw material price volatility to some extent and improve the margins.
Median P/E for Gufic has been around 25 times, which means it is currently trading at multiples close to its historical valuations.
As for the risks to this analysis, For Stunnox to grow big, it must compete with ‘Botox’ which is a behemoth brand in this segment. Biologicals and immunotherapy have a low success rate and high complexity and can be cash guzzlers in the near term.
So, would you invest in Gufic Bio?
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