Have been stuck with fever and thus would keep it short today.
One of the companies which attracted me recently was Jenburkt Pharma. The company has a brilliant dividend yield of 6.25% and a consistent dividend record.
Jenburkt is engaged in manufacturing and marketing of speciality and high quality pharmaceutical formulations and healthcare products.
To come-up with some valuation, I took the last year's dividend and compounded it at historical growth rate.
The last year dividend was Rs.4.20. Required rate of return: 20%. Lowest historical growth rate of profits: 17%.
Thus I came up with a value of 4.20 * 100 / (20-17) = 140. At current price of 66 it looked quite attractive.
The above was all wrong.
There was a good discussion about the company and its products. It seems the company's products have a tremendous competition. Probably the strength lies in the company's distribution network or sales team. Over the years these hasn't been much sales growth (just 13% in 10 years). But the OPM margins have shown a consistent up-trend (increased from 7% to current 15%).
If there was one thing that had a real impact from yesterday's post, then it was to take average earnings for the calculations. If we take the average earnings, then the valuations no longer look too attractive and the dividends growth rate looks improbable.
In last 4 annual reports the management has been talking about growth opportunities but the same haven't translated much in the financials.