Thursday, September 15, 2011

Is Unichem Laboratories cheap?

The promoter of the company, Prakash Mody is heavily buying shares of the company from the open market. See the table below:
DateShares BoughtAmountAverage Price
8 Aug73891090247147
9 Aug309834529405146
10 Aug95921397938145
11 Aug262093744218142
12 Aug142572094638146
16 Aug17594625772570146
17 Aug3395494256145
18 Aug5160762878147
22 Aug145722091826143
23 Aug225803199009142
24 Aug6282885110142
25 Aug1476210933143
26 Aug2447352137144
29 Aug4169599724144
30 Aug157842243806142
2 Sep3000426441142
5 Sep22688232403021143

His stake in the company has gone up from 11.61% to 12.24%. The company's operating profit margin over the last two quarters has been around 14-15%, which is lowest till 2002. Net profit margin of around 8.25% is also the lowest in the last ten years. But even at the current price of INR 144, the company trades at 2 times book and 15 times earnings. The (net current assets + investments) stands at INR 30 per share. The earnings are obviously depressed due to margin pressure, but the high P/E is still not justified. Even though the promoters are showing a lot of confidence in the company, I would wait for price to correct to at least INR 100 to enter the scrip. I already have some bought in 2009 at the split adjusted price of INR 60.

Image: worradmu /
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