Corporate India | Portfolio Choice

Portfolio Choice ¹²³ ¹⁵

Published: Aug 29, 2019
Updated: Aug 29, 2019

GLAXOSMITHKLINE PHARMACEUTICALS

BSE ticker code	NSE ticker code	Equity capital	52 week high/low	CMP	Market Capitalisation
500660	GLAXO	Rs. 169.41 crore; FV Rs. 10	Rs. 1812 / Rs. 1131	Rs. 1380	Rs. 23378 crore

Market leader across the board

Pharmaceuticals is engaged in developing a range of products mainly in three areas, viz., pharmaceuticals, vaccines and consumer healthcare. Its prescription medicines range across therapeutic areas covering anti-infectives, dermatology, gynae-cology, diabetes, oncology, cardiovascular disease and respiratory diseases. It also offers a range of vaccines for prevention of life-threatening diseases, suchas pneumococcal disease, meningitis, hepatitis, rotavirus, whooping cough, smallpox and influenza. The company’s outlook is very heathy.

Consider:

GSK is a British multinational pharmaceutical company headquartered in Brentford, London. It was established in 2000 by a merger of Glaxo Wellcome and SmithKline Beecham. The foreign parent holds a 75% equity stake in the Indian company. The company is forging ahead on the innovation front with the recent launch of Nucala, a biologic for severe refractory eosinophilic asthma in adults. In preventive healthcare, the company continues to be the No. 1 vaccines company in the self-pay segment with a 30% value marketshare. It has market leadership in several therapeutic segments.
GSK has put in place an optimal commercial model to deliver sustainable profitable growth. At the core of this model is the principle of putting energy where it matters — focus and efficiency — to accelerate growth. Therapy areas were identified for sharp focus, namely, anti-infectives, dermatology, respiratory, gastro-intestinal and anti-pyretic. The company’s product portfolio was optimized, with 20 focus brands to be actively promoted to customers and healthcare professionals (HCPs).
With an investment of over Rs. 1,000 crore, its upcoming manufacturing facility at Vemgal, Karnataka will be the first greenfield pharmaceutical manufacturing site that GSK has built globally over the past ten years. It is also the first facility designed for the new GSK Production Systems (GPS), whereby it will deliver the concepts of zero accidents, zero defects and zero waste.

Consolidated sales grew 8% to Rs. 3,128.12 crore for FY 2019. OPM improved 170 basis points to 19.2%, which saw OP go up 19% to Rs. 600.79 crore, and the net profit shot up 27% Rs. 445.39 crore. During Q1 FY 2020, consolidated sales grew 7% to Rs. 787.97 crore for the quarter ended June 2019. OPM improved 250 basis points to 21.0%, which saw OP go up 22% to Rs. 165.29 crore. PAT grew 35% Rs. 113.54 crore. In FY 2020 we expect the company to register a consolidated EPS of Rs. 29.0. The scrip trades at Rs 1380.

PERFORMANCE INDICATORS (Rs. in crore)

Year	Net Series	Net Profit	EPS (Rs.)	Div (%)	BV (%)	RONW (%)
2016-18	2895.65	350.72	20.0	350.00	242.89	17.26
2017-19	3128.12	445.39	25.2	200.00	126.31	21.22
2018-20	3401.68	491.28	29.0	250.00	130.31	21.41

WONDERLA HOLIDAYS

BSE ticker code	NSE ticker code	Equity capital	52 week high/low	CMP	Market Capitalisation
538268	WONDERLA	Rs. 56.51 crore; FV Rs. 10	Rs. 375 / Rs. 260	Rs. 275	Rs. 1554 crore

Riding a booming fun sector

Promoted by Kochouseph Chittilappilly and Arun Chittilappilly (who also promoted V Guard), Wonderla Holidays (WH) is one of the largest amusement park operators in India, with over 19 years of successful operations. It owns and operates three amusement parks under the brand name ‘Wonderla’ at Kochi, Bengaluru and Hyderabad, and a resort at Bengaluru. Prospects for the company are quite promising.

Consider:

The amusement park industry in India is growing at an unprecedented rate due to the rise in disposable incomes in India, enhanced hygiene and improved standards of safety. According to the Indian Association of Amusement Parks and Industries, the industry is expected to grow at a CAGR of more than 25% with an annual revenue of at least Rs. 6,250 crore ($ 884 million) by 2022. Every year, amusement parks in India attract over 30 million visitors, 50% of whom are children and youths who visit in groups or with families. This offers an enormous opportunity for Wonderla and paves the way for tremendous expansion and growth. With a good mix of rides and service offerings, coupled with a stable and experienced team, the company is well-placed to seize this opportunity.
The company has an in-house manufacturing facility at Kochi where it manufactures and constructs rides and other attractions for its parks. The in-house manufacturing facility thus helps in constant innovations and development of new attractions and experiences for guests. The company also has an in-house technical team of more than 200 employees to keep maintenance costs under check.
From April 19, the company has hiked the ticket prices by 5%. It has also shifted its advertising from print to digital and is targeting more revenues and bookings from online digital media. The company has also introduced new rides across all its parks to attract more customers. New loyalty programmes, including various theme-based initiatives, have been started to attract more customers. All these will aid higher growth going forward, after a challenging year. Further, all the three parks have a surplus land bank for future growth, which can be used for unlocking value in different ways. The company generates sufficient free cash flows, which can be used for further developments of new parks or new infrastructure in the existing parks.

For fiscal 2019, net sales were up by 4% to Rs. 282.04 crore and net profit jumped 44% to Rs. 55.41 crore. For FY 20, we expect the company to register an EPS of Rs. 12.8. The scrip trades at Rs. 275.

PERFORMANCE INDICATORS (Rs. in crore)

Year	Net Series	Net Profit	EPS (Rs.)	Div (%)	BV (%)	RONW (%)
2017-18	270.59	38.51	6.8	15.00	136.74	5.09
2018-19	282.04	55.41	9.8	18.00	144.85	6.96
2019-20 (E)	315.82	72.48	12.8	18.00	155.88	7.04

JMC PROJECTS (INDIA)

BSE ticker code	NSE ticker code	Equity capital	52 week high/low	CMP	Market Capitalisation
522263	JMC PROJECT	Rs. 33.58 crore; FV Rs. 2	Rs. 150 / Rs. 67	Rs. 107	Rs. 1796 crore

Wide construction palette

JMC Projects (India), a part of the Kalpataru group (with a 67.19% equity stake), is one of the leading civil construction and infrastructure companies in the country, with a proven track record of completing prestigious projects within the scheduled time and quality parameters to the customer’s satisfaction. The company has a promising future.

Consider:

JMC undertakes construction contracts in a variety of segments. It constructs plants for industries (such as power, automobiles, textile, pharmaceutical, agrochemical, paint, cement, electronic consumer goods, sugar, etc.) commercial, office and residential complexes, hospitals, IT parks, R&D complexes, housing and residential buildings, institutional buildings and hotels. The company’s infrastructure contracts take the form of road projects, bridges, metro rail, reservoirs, processing units, special projects and bus terminals, besides contracts in the power segment.
The company has a robust order book. At the end of June 2019, the order book stood at Rs. 10,173 crore, of which infrastructure projects account for around 35%. During Q1 FY 2020, the order inflow was Rs. 1,130 crore, driven by B&F projects. In addition, it has an L1 order book of Rs. 600 crore. It focus continues on infrastructure development opportunities in India. The company has strengthened its presence in strategic sectors like water, urban infrastructure, roads and bridges. JMC is well positioned to take advantage of rapid infrastructure development in India, given its strengths, experience and domain expertise across various segments of infrastructure. International business could be one of the biggest growth drivers.
JMC is one of the fastest growing companies in the water business, with the order book standing at over Rs. 2,500 crore as on March 2019. At present, it has a strong presence in Madhya Pradesh, Chhattisgarh, Bihar and Odisha, apart from an international presence in Sri Lanka. In the future, the buildings and factories business will reap opportunities from IT campus development, the government’s thrust on healthcare, education, retail and the ever-increasing demand for housing, factories and cement plant expansion plans of major players.

Sales for Q1 FY 2020 amounted to Rs. 903.87 crore, indicating a spurt of 31 per cent. This sales growth was driven by strong execution of the infra business. The net profit shot up by 34% to Rs. 35.52 crore. In FY 2020, we expect the company to register a standalone EPS of Rs. 10.3. The scrip trades at Rs. 107. P/E on FY 2020 expected EPS works out to around 10.4.

PERFORMANCE INDICATORS (Rs. in crore)

Year	Net Series	Net Profit	EPS (Rs.)	Div (%)	BV (%)	RONW (%)
2016-18	2755.64	106.12	6.3	3.00	234.95	14.35
2017-19	3168.99	119.56	7.1	35.00	54.99	16.60
2018-20 (E)	3879.81	173.08	10.3	35.00	64.60	16.81

Portfolio Choice 123 15

GLAXOSMITHKLINE PHARMACEUTICALS

Market leader across the board

WONDERLA HOLIDAYS

Riding a booming fun sector

JMC PROJECTS (INDIA)

Wide construction palette

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