Often it is believed that Value investing stands for analyzing boring sectors such as manufacturing, textiles etc where market is discounting good companies and you get bargains. Well, not true! Today, we cover a truly innovative Indian biotech firm which is bringing life back into earth by eco-friendly bio-products such as biocides, bio-fertilizers and hybrid seeds.
With constant abuse of soil with pesticides, chemicals and seeds, earth loses its fertility and poison from these chemicals seeps into human bodies. Camson Biotech is innovating since 1993, to create residue free farming and have portfolio of products which have brought life back into even infertile soil and happiness into thousands of farmer families.
Back to what we do best! Number crunching. Camson has grown impressively from revenues of Rs 17.46 Crores in 2007 to Rs 99.14 Crores in 2011. Net profits have grown from Rs 3.4 crores to Rs 22 crores in this duration. At a current EPS of Rs 12.15 per share, and Market price of Rs 49.5, the stock trades at a very reasonable P/E ratio of 4.06. Indeed a value stock, available at overall market cap of just about Rs 89.32 crores.
For 89.32 crores, you get a company whose accumulates reserves are 86.75 crores, from the 2011 balance sheet. Thus you are buying the scrip at even lower price from its Book Value of Rs 57. Imagine owning a innovative biotech firm, at a PE ratio of 4 and 15% discount of its Book Value. That too a firm with unique innovative eco-friendly products, and whose revenues and profits have gone up 5 times in last 4 years.
With the harsh bear market we have seen in 2011, many such innovative firms are lying in dust at a unreasonably cheap valuations, waiting for better times to come. Camson is currently trading at yearly low range of Rs 49.5, which is at the lower range of 52 weeks highs of Rs 137 and low of Rs 47. Thus your downside risks are limited and upside is about 3X from here. One negative about this scrip is low promoter holding which has come down from 36.7% share in the company to about 31.4% in recent quarter. This is indeed a worry-some sign.
On the whole, it’s a terrific firm and should deliver handsome returns to mid-term patient investors.