Financial Performance: (Concall notes Feb 2024)
SMS Pharma has demonstrated strong financial performance in fiscal year 2024, with a notable 9% quarterly increase in topline revenue and an impressive 24% growth in the first 9 months. Moreover, the company’s EBITDA saw a remarkable year-on-year surge of 57% in Q3 FY24, reaching Rs. 29 crores, while the PAT surged by 205% year-over-year to Rs. 11.5 crores in the same period. Operational profit margins witnessed significant improvement, attributable to diligent cost reduction efforts.
Business Strategy:
The company has strategically increased its capacity utilization to 65-70% in Q3 FY24 and implemented a backward integration strategy aimed at reducing costs and enhancing profit margins. Additionally, plans are underway to submit a minimum of 10 drug master files in the US in the forthcoming fiscal year. SMS Pharma is poised to strengthen its presence in the Ibuprofen market and intends to introduce new products in FY25. It aims to maintain a stable pricing pattern for Ibuprofen while expanding into additional geographical locations.
Future Outlook:
SMS Pharma anticipates mid-teens growth in FY25, with EBITDA expected to range between 18-20%. Moreover, a growth rate of 10-15% is projected for the export business in the coming quarters, with sustainable growth expected to continue at a rate of 10-15% in the export segment.
Investment and Expansion:
To support its growth trajectory, the company has approved a fundraising initiative to issue convertible equity warrants to the promoter group. Furthermore, SMS Pharma has planned CAPEX for expanding capacity and reinforcing backward integration efforts.
Cost Optimization:
The company has implemented robust cost optimization measures, including negotiations with suppliers to secure better pricing and overall cost reduction.
Customer Focus and Innovation:
SMS Pharma has observed significant growth in sales volumes across various products, reflecting its strategic focus on delivering value to customers and fostering innovation.
Sustainability and Stakeholder Value:
With a commitment to sustainability and delivering superior value to stakeholders, SMS Pharma prioritizes responsible business practices and long-term stakeholder relationships.
Technical Analysis (26-02-2024)
On the weekly chart, SMS Pharma is exhibiting several bullish indicators, suggesting potential upward momentum in the near term. The Relative Strength Index (RSI) stands at 66, indicating that the stock is not yet overbought but has significant strength behind its current trend. The Moving Average Convergence Divergence (MACD) has recently formed a bullish crossover, signaling a shift in momentum towards the upside. This convergence of the MACD line above the signal line underscores the increasing bullish sentiment among traders and investors.
Accompanying these indicators is the Average Directional Index (ADX) reading of 52, indicating a strong underlying trend. The rising ADX suggests that the current bullish momentum is robust and likely to persist. Additionally, the 20-day Exponential Moving Average (EMA) at 130 further supports the bullish outlook, as the stock’s price remains comfortably above this short-term trend line.
A significant breakout level at 139 adds to the bullish narrative, with the stock poised to potentially surge beyond this key resistance point. Moreover, the price pattern of an Inverted Head and Shoulders, a classic bullish reversal pattern, further strengthens the bullish thesis. This pattern typically signifies a shift from a downtrend to an uptrend and is often accompanied by increased buying interest.
Adding to the bullish sentiment is the rising volume, indicating growing participation from market participants. Higher volumes during an uptrend suggest conviction among traders and investors, further validating the bullish outlook for SMS Pharma.
In summary, the combination of bullish technical indicators, including the RSI, MACD crossover, ADX strength, EMA support, breakout level, and the formation of an Inverted Head and Shoulders pattern, along with rising volumes, paints a promising picture for SMS Pharma on the weekly chart. Traders and investors may consider this confluence of factors as a strong indication of potential upward movement in the stock’s price in the coming weeks. However, as with any investment, it’s essential to conduct thorough analysis and consider risk management strategies before making trading decisions.
Remember, this analysis serves as an educational tool and should not be construed as financial advice. Always conduct thorough research and consult with a qualified financial advisor before executing any trades or investments.
Disclaimer: The above analysis is for educational purposes only and should not be considered financial advice. Investing in the stock market carries inherent risks, and individuals should conduct their own research or consult with a financial advisor before making any investment decisions.
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