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In this article, we will discuss the Fundamental Analysis of Tarsons Products limited. We will discuss its business model, company financials also we will study its valuations, and at the end, we will check the Pros and Cons of this stock.
Disclaimer: This article is only for educational purposes. I do not recommend buying or sell so please consult your advisor and do your own research before investing.
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About the Company
- Tarsons Products was incorporated in 1983 in Kolkata, West Bengal.
- It is an Indian labware company that is involved in designing, developing, manufacturing, and marketing plastic lab equipment.
- This equipment is used in labs in research organizations, academic institutes, pharmaceutical companies,
- Contract Research Organizations (“CROs”), Diagnostic companies, and hospitals.
- The company has a vast portfolio of over 1,700 SKUs across 300 products.
- Its products are divided into 3 categories which are
Consumables: centrifuge ware, cryogenic ware, liquid handling, PCR consumables and petri dish, transfer pipettes, etc.
Reusables: bottles, carboys, beakers, measuring cylinders, and tube racks.
Others: Benchtop instrumentation such as vortex shakers, centrifuges pipettors, and others.
- The company has many reputed organizations as customers including:
- Educational institutions like the Indian Institute of Chemical Technology & National Centre for Biological Sciences
- Pharma companies like Dr. Reddy’s Laboratories & Enzene Biosciences CROs like Syngene International & Veeda Clinical Research
- Diagnostic players like Molbio Diagnostics, Agappe Diagnostic, Metropolis Healthcare, Dr. Lal Path Labs, Mylab Life Solutions.
- The company has 5 manufacturing facilities in West Bengal.
- It also has a wide distribution network of 141 distributors across India.
- The top 10 distributors accounted for 55.9% of sales for Tarsons in FY21.
- The company supplies its products to over 40 countries.
- In FY21, around 33% of revenues were from exports.
- The revenue distribution for FY21 across its key segments was:
- Consumables: 62% Reusables: 34% Others: 4%
- Tarsons is the biggest player in the lab equipment industry in India.
- The geographical revenue & distributor breakup in FY21 of Tarsons was
- The company has shown stellar performance in the recent past with RoE at 31% and Net profit margin of 29.4% in FY21.
- This was a detailed overview of the company.
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Fundamental Analysis of Tarsons Products Limited
Fundamental Analysis of Tarsons Products Limited is as follows:
Tarsons Products Industry Overview
- The global healthcare market is expected to grow at a steady CAGR of 8.9% by 2025 to $15 trillion.
- Around $12.3 trillion will be the market for healthcare services which will dwarf all other segments in this industry.
- There is a lot of scope for the expansion of the healthcare sector in India.
- Healthcare Expenditure as a % of GDP in India was at only 3.5% in 2018 vs the world average of 9.8% and the Asia Pacific average of 6.7%.
- We can say that the healthcare sector has huge growth potential in India.
- The Indian Healthcare market is expected to go through a boom phase with a CAGR of 23% to reach a market size of $557 billion by 2025.
- While the global lab equipment market is expected to grow at a steady CAGR of 4.9% by 2025.
- The plastic lab equipment market is expected to grow at more than double the market rate at 10.5%.
- It will be because of the widespread acceptance and substitution of traditional glass equipment with plastics.
- Plastic products are expected to rise to 67% of the overall market in 2025 from 46% in 2015 and 52% currently.
- This shift from glass to plastic is expected to be even faster in India to reach 75% in 2025 from the current 52%.
- The fastest CAGR for plastic lab equipment is expected to be seen in India with an expected CAGR of 16% till 2025.
- The key growth drivers for the plastic lab equipment industry worldwide are:
- The factors are-
- Rise of lifestyle diseases and conditions Increased growth in Research & Development.
- Growth in Outsourcing in the pharma industry Substitution of glass with plastics.
- Renewed focus on healthcare due to COVID-19 Longer shelf life & recyclability.
- This was an overview of this industry.
Competitors of Tarsons Products
Now let’s talk about competitors of Tarsons Products.
- On the above figure, you can see that Tarsons Products is one of the oldest companies among its competitors.
- It is one of the only few companies which operates in consumables, reusables, PCRs/cell cultre.
- It has its own manufacturing plant in India.
Company’s Financials
Now let’s talk about the company’s financials.
- On the above chart, you can see that all the figures are in crores.
- First, let’s see Total Assets. This figure increased from 248.71 crores in FY20 to 295.95 crores in FY21.
- In Total Revenue, this figure increased from 180 crores to 234.29 crores.
- In Profit After Tax, this figure increased from 40.53 crores to 68.87 crores by end of FY21.
- Comparing quarter 1 with FY21 & FY22, we can see improvement here as well.
- In Total Assets, this figure increased from 235.66 crores to 364.77 crores.
- In Total Revenue, this figure increased from 43.57 crores to 71.13 crores.
- In Profit After Tax, this figure increased from 6.97 crores to 24.84 crores.
Important Ratios of Tarsons Products Company
Important Ratios of Tarsons Products Company are as follows:
- Net Profit Margin is 29.40%.
- Operating Profit Margin is 40.58%.
- Earnings per share is 13.43%.
- PE is 49.29.
- Debt to Equity is 0.356.
- Current Ratio is 1.86.
- 2-year sales CAGR is 12.62%.
- 2-year profit CAGR is 32.96%.
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Pros and Cons
Now we will talk about the pros and cons of investing in Tarsons Products.
Pros
- Now let’s first talk about Investment pros.
- There are big opportunities for the rise of the healthcare industry particularly the diagnostics space and the CRAMS space.
- The Diagnostics space is untapped in India while the CRAMS industry has an advantage of the low cost and highly skilled workforce in India.
- Tarsons Products has been in this industry of making lab equipment for over 3 decades and is the largest player with a manufacturing plant in India.
- Thus, it has a brand advantage in India in this field.
- The company has good export potential given the low-cost manufacturing advantage.
- The company will focus on ODM sales in mature markets like the USA & EU.
- The company will expand using branded sales in emerging markets like South America & Asia Pacific.
- The biggest share of sales comes from the consumables products at over 60% of sales.
- This is a segment that has a constant demand for replenishment in the industry as most of them are single or limited use only.
- So these were the advantages.
Cons
- Now let’s talk about a few negatives as well.
- The company imports more than 75% of its raw materials with more than 44% of imports coming from the EU.
- Its top 10 suppliers were responsible for 76.8% of raw material requirements in Q1FY22.
- So the company is dependent on its suppliers for its raw materials.
- The loss of any key supplier will be very harmful to the company.
- The raw material costs form a significant part of overall costs at 31.6% of total expenses in FY21.
- Most of the raw materials are exported so the company may be negatively impacted by raw material price inflation and forex volatility.
- The company is at risk from environmental regulations which may limit the usage or sale of plastic products in the future.
Conclusion
Overall if we conclude Fundamental Analysis of Tarsons Products has an excellent business and its management, strong competitive advantage, and good financial and bright growth prospect which makes it a fundamentally good company.
Tarsons Products Limited is the second-largest player in plastic labware and post-pandemic, due to rising concerns for health, this company is poised for bright prospects ahead. It is expanding to meet the rising demand for its products. The issue appears reasonably priced based on its financial data and future prospects. TPL is enhancing its role and expanding its product portfolio. The scrip is expected to generate first-mover fancy post listing, Investors may consider investment for the medium to long term rewards.
What is your take on Tarsons Products Limited have you invested in it do let me know in the comment box. I hope you find this analysis useful, and if yes please share it with your friends and family.
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