Stocks – Industry

Distelleries are good bets against recession!!

Posted on January 10, 2008. Filed under: Stocks - Industry |

Drinking has become a regular habit among Indians and socially more acceptable these days. Recently I read in one of the newspapers that in the month of December alone, the sales of liqour through TN Government retail outfit, TASMAC was a whopping Rs220 crores!! Out of which, more than 60 crores worth of liqour was bought by consumers(!) during the last week of December.

Considering the above fact, distellery stocks look attractive if there is recession or not. Already distellery stocks has caught the attention of investors and have appreciated well in the last few months. Added on to that is the Government’s drive to to go for Ethanol-mixed petrol in a big way and power production by many of the distelleries is adding more stability to the earnings. As an industry, Distelleries and breweries looks interesting.

Few of the stocks worth looking at are:
1. Empee Distelleries – They are one of the authorised vendors for TASMAC in Tamilnadu and also has presence in all the four southern states. Not only a distellery but also has interests in Real Estate. The company owns huge tract of land near Poonamallee on the outskirts of Chennai, which is on the way to the industrial corridor of Sriperumbudur. They have major plans for developing townships and as per one analyst estimate real estate activities would bring in more than Rs200 crores revenue to the company in the next 3-4 years.

2. Pioneer Distelleries – Already a research report has been published by HDFC Securities in the last week of December. They are going on massive capacity expansion (nothing but natural!!) and co-generation of power.

Two other stocks worth investigating is GM Breweries and Balaji Distelleries.

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Indian Pharma stocks – time to have a look at it!

Posted on November 6, 2007. Filed under: Stocks - Industry |

Over the last couple of days I have been getting a feeling that Pharma stocks are being completely overlooked by the market during the latest bull run. Pharma stocks are generally considered as a defensive sector and considering the fact that the world equity markets are going through turbulence, I think the time has come for Pharma to get a re-rating.

Few points going in favour of pharma companies are:
1. In the US, the biggest drug market, in 2008 alone, some USD20 Billion worth of stocks are going to go off-patent. What it means is that it provides opportunity for Indian drug companies to launch their generic versions of the branded medicines. Indian companies have done that successfully in the past and I believe that they would do it better in the years to come.
2. Large acquisitions by all major Indian pharma companies has helped them to have global presence. By introducing newer products from their portfolio and the management techniques(!) in the acquired companys’ home markets, they may be able to increase the Operating Margins of the acquired companies.
3. Increasing cost of medical treatment in western countries forcing the Governments and Insurance companies to favour generic drug makers (read Indian drug companies) compared to branded drugs sold by MNC pharma companies like Novartis, Pfizer etc.,
4. Lifestyle changes taking place in India and across the globe would result in more dependence on medicines in the days to come.
5. Pharma stocks are quoting at a PE ratio of around 10-12 compared to Sensex PE of 25.

I have just started looking at the pharma space to identify stocks which I can buy. I dont think I am an expert in understanding various pharmaceutical molecules, drug lifecycles etc., But I guess I can make some sense of the reported numbers. So I am going to look at Sept 2007 quarter results of Pharma companies in the coming days.

I am also looking at mutual funds focusing on Pharma sector.

With the Indian stock markets at a all time high, pharma would provide you with a good defensive bet.

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