Private Client Research

Rating

Buy

Sector

Medical Equipment / Supplies / Accessories

Company

Poly Medicure Ltd

Medical Equipment / Supplies / Accessories

August 19, 2020

Sensex: 38614.79

CNX Nifty: 11408.40

NSE: POLYMED

BSE: 531768

Reco Price

Rs. 415.00

Price Target (3 - 6 Months)

Rs. 520.00

Upside

25.30%

Date

August 19, 2020

Sensex

38614.79

CNX Nifty

11408.40

Exchange

Code

NSE

POLYMED

BSE

531768

Stock Data

CMP (Rs)

439.50

Face value (Rs)

52 Week Range (Rs)

447.40 - 170.50

Market cap (Rs Crores)

3874.48

Price To Book Value (x)

8.41

P/E Ratio (x)

37.70

EV/EBIDTA (x)

20.82

One Year indexed Stock Performance

Poly Medicure Ltd Sensex

Return (%)

12m

36m

Absolute

13.43

46.72

148.12

110.07

Sensex

3.20

-6.55

3.24

23.53

Shareholders

(in %)

30-Jun

Promoter

48.76

Public

51.24

Others

0.00

Total

100

+91 22 6639 3000

research@stockaxis.com

Profile

Poly Medicure Limited (Polymed) is one of the leading medical devices manufacturers and exporters in India. The company holds a dominant position in the medical consumables market with focus on Innovation, Safety, and Quality.

Polymed is engaged in the development, manufacture and marketing of quality Disposable Medical Devices in the product verticals of Infusion therapy, blood management, gastroenterology, surgery and wound drainage, anesthesia and urology. The company manufactures and supplies in India and internationally. The company has a well-diversified and de-risked business model, comprising a wide range of products with clients across more than 110 countries. The company currently operates five manufacturing units in India and three abroad - China, Egypt (JV) and Italy.

Plan1 Health s.r.l., Italy, (a step-down subsidiary) develops, manufactures and sells medical devices worldwide, in particular vascular access systems and long-term implantable systems worldwide.

Huge opportunity size for this MedTech MNC

Beneficiary of ‘Make in India’ Boost
Despite the strong demand for medical devices, India's domestic manufacturing has remained low. The medical device market continues to be dominated by imported products, which comprise of around 70% of total sales. The Government wants to reduce dependence on imports and boost ‘Make in India’, as a result, health cess of 5% on imports of medical equipment was imposed on 2^nd February 2020 in the Union Budget. Polymed is a strong beneficiary, as it has strong focus on manufacturing products which are import substitutes.

Classification of Medical devices as Drugs will ensure consolidation in the industry
In consultation with the Drugs Technical Advisory Board, the government announced on 11 February 2020 that all medical devices intended for use by humans or animals are to be classified as drugs and regulated under section 3 of the Drugs and Cosmetics Act, 1940, from 1 April 2020. This will ensure that all medical devices meet certain standards of quality and efficacy, and make medical device companies accountable for the quality and safety of their products.

Lack of regulations and its enforcement was the major reason for low-medium brand image of India’s medical devices in the exports market. We believe these stringent regulations will ensure quality and improve market share of branded players like Polymed.

Focus on R&D and innovation
Polymed has developed the technology to create moulds internally with strong R&D team comprising of 50+ engineers and 30+ engineers in process engineering. The company operates a research and development centre at Faridabad, Haryana, which is approved by Department for Scientific & Industrial Research and by the Ministry of Science & Technology, Government of India. R&D is primarily focused on developing new products within existing as well as new critical care product verticals, and further improving existing processes and productivity.The company’s focus is on increasing its R&D spend to 5% of revenue and commercializing new innovative products.

Expanding product basket
Polymed has developed strong in-house capabilities like ability to create molds, robotized manufacturing, tooling and machine making capabilities. This has helped to commercialize new innovative products faster and expand the company’s product basket in newer therapy areas. Polymed recently ventured into manufacturing of new products like face shield, VTM Kit, Pre-filled Syringe, PPE Kits, Dialysis Machine, N 95 Masks, Single use Dialyzer and Blood collection needle with flashback.

Robust domestic growth
The Covid-19 pandemic has exposed India’s inadequate health infrastructure. In the fight against Covid-19, the government has increased focus towards improving India’s healthcare infrastructure and deepening the healthcare sector. Polymed has been investing heavily in increasing its manufacturing capacity and R&D; it has also been consistently introducing new products which are import substitutes. Currently 70% revenue comes from exports. We see significant scope for domestic business to grow and improve its share in the company’s total revenue.

Technical

TRADING FOR NEW 52 WEEK HIGH

Price: POLY MEDICURE is in a secular bull trend from last many months and still ongoing trend of higher highs-higher lows on weekly charts is not violated, indicating inherent strength in the counter, and any technical pullback provides an excellent opportunity to accumulate stock on dips. The Parabolic SAR on daily chart is trading below the price, indicating upward momentum is likely to continue in the stock. On daily chart the stock is well placed above all its major moving averages (21 & 50 SMA) indicating the stock for bullishness.

Indicator: Among the oscillators front, the RSI(14) on daily chart has given a positive crossover to 9 period moving averages and this supports our bullish stance in this counter. Bollinger Band (20, 2, S) set up on daily chart has started to expand and currently the stock is trading above the upper band of Bollinger Band indicating the volatility expansion on the higher side. The DMI+ is also pointing in northward direction and is currently placed around 34.39 levels, whereas ADX trading at 42.84 well above 40 mark, which shows overall strength is likely to bring in sustained buying from the current levels.

Volume: Price and volume analysis plays an important part in determining overall strength or weakness in the stock. Price and volume pattern are moving in the same direction which reflects the true movements in the stock. POLYMEDICURE stock has seen the profit booking with thin volume, which still shows the movement of this stock, is still on bull side.

Conclusion: Considering the above data facts, we recommend for medium term investors to enter the stock at the current levels for targets of Rs.520, while any correction into the said trading range can be utilized to average the stock keeping stop loss below the consolidating range of Rs.363 level.

DISCLAIMERS AND DISCLOSURES

Opulent Investment Adviser Private Limited (hereinafter referred to as 'Opulent') is a SEBI Registered Research Analyst (Registration No. INH000007669) and Investment Adviser (Registration No INA000011644) registered under the SEBI (Research Analysts) Regulations, 2014 and SEBI (Investment Advisers) Regulations, 2013 respectively. Opulent prepares and shares research data and reports with clients and investors in compliance with SEBI (Research Analysts) Regulations, 2014. Opulent also offers investment advisory services in compliance with SEBI (Investment Advisers) Regulations, 2013. Opulent also ensures compliance with other applicable directives, instructions or guidelines issued by the SEBI from time to time.

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