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Square Pharmaceuticals. The name itself rouses reliability. So it is natural to assume that its stock will be a safe option for retail investors.
The reality though is quite different. Despite logging in double-digit growth year after year, its stock price is tanking for the last few months. So much that it hit a six-year low of Tk 182 last week, according to data from the Dhaka Stock Exchange (DSE).
“The plunge is not based on Square Pharma’s performance,” said Ali Xahangir, chief executive officer of Amarstock, a website that provides technical analysis on the market movements.
Square Pharma made its debut in a humble way in 1958 as a partnership firm under the leadership of late Samson H Chowdhury and has gone on to become a landmark in Bangladesh’s pharmaceutical landscape.
Today, it has 858 products, with 16 of them amongst the top 50 pharma brands in Bangladesh. Seclo, a tablet for gastric ulcer, is its most popular product.
In 1987 it pioneered export of medicines from Bangladesh. And today, its products are shipped to 42 countries. In the last financial year, exports brought home Tk 149.05 crore, up 2.76 percent year-on-year.
It logged in 10.85 percent higher consolidated turnover and 9.01 percent upper profits in the 2018-19 financial year.
The company has no long-term loans outstanding; it operates with its own long-term sources and shareholders’ equity. For the last five years at least, it has been providing more than 42 percent dividend.
The drug maker is setting up a unit in Kenya for $21 million to manufacture and sell generic pharmaceutical medicines in Kenya and in the East African Community (EAC).
The plant, whose working capital requirement is $4 million, will have the capacity to manufacture 2 billion tablets and capsules and 30 million bottles of liquid formulation each year.
The project is expected to be complete this year, with trial and commercial production to commence in June and September respectively.
In short, Square Pharma is a solid company and is cruising along nicely.
So its stock price taking a beating is rather shocking — and is illustrative of the current haphazard state of the market.
The stock is a victim of the current confidence crisis on the market, according to Xahangir.
On the flipside, investors with long-term investment horizon and the institutional ones are lapping up its stocks now that the price is lower, he said.
Between July and November, institutional investors’ stakes rose to 10.28 percent from 9.91 percent, according to data from the DSE.
“Square Pharmaceuticals is one of the leading company that pleased stock investors with its continuous growth in revenue, profits and handsome dividend declaration. Still, its stock price plummeted,” said Masud Ur Rahman, an investor.
Although it impacted his portfolio, he will hold on to his Square Pharma shares, he said.
Rahman is not alone. DSE data shows general investors are not offloading their Square Pharma shares at all.
Square Pharma’s branding, quality, business ethics and nationally recognised efficient top management have a positive impact on doctors and consumers when it comes to choosing products, said Khandaker Habibuzzaman, its company secretary.
Ensuring quality is crucial in the pharmaceutical sector as people will not buy products if they are distrustful of the brand, he added.
PHARMA MARKET
The domestic pharmaceutical market size stood at Tk 22,352 crore with a 16.71 percent compound annual growth rate in the last five years.
The pharmaceuticals sector providing about 98 percent of the total medicine requirement of the domestic market and exports to more than 147 countries. The local companies control 90 percent of the market and multinationals 10 percent.
The country’s pharma sector has the potential to grow at 15 percent for the next five years, riding on the expanded domestic market as well as new export frontiers.
(TDS)