>Fulford (India) Limited (PPFAS)

Steady Operating Performance
Fulford (India) Ltd. has been a steady performer in terms of top-line & bottom-line growth, over the past several years. The company has consistently achieved growth in the range of 10 - 13% CAGR over CY04-CY08 period. Going forward, we expect the company to maintain similar growth rates of 10.3% & 14.4% CAGR in top-line & bottom-line respectively, over CY08CY10E period.

Strong & Committed Parent
Fulford is a 54% subsidiary of Schering-Plogh Corporation, USA, a research-based company operating worldwide. The parent company is committed to the growth of its Indian subsidiary, which can be seen from:

- The new product launches almost every year

- Increasing its stake through prefential allotment of shares, followed by an open offer.

Expectation of an Open Offer
Fulford's parent company - Schering-Plough is getting merged with Merck & Co. Inc. USA. Fulford is a 54% listed Indian subsidiary of Schering-Plough, whereas Merck has a wholly owned unlisted subsidiary - MSD Pharmaceuticals Private Ltd. After the successful completion of the merger, there are chances of Merck coming up with an open offer for shares of the listed entity Fulford (India) Ltd. That would be a very positive trigger for the stock.

Valuations
We expect Fulford (India) Ltd. to achieve a growth of 10 - 13% CAGR over CY08-CY10E period, both in terms of its top-line & bottom line. Besides, the company is cash-rich & completely debt-free. We expect the company to have approximately Rs. 280 per share as Cash & cash equivalents on its Balance Sheet as of December 2008. At CMP of Rs. 365, the script trades at 6.1x CY09 & 5.5x CY10E earnings. We initiate coverage with a BUY on the stock.

To see full report: FULFORD