Edelweiss - Polymedicure

At the CMP of INR 126 the stock trades at 6x our FY08E EPS of INR 21.2. We belive that current valuations are very attractive and we maintain our Buy recommendation on the stock.

Medical device manufacturer Polymed Medicure is eyeing the US market, making it the first Indian company to do so. Once the company’s plant in Faridabad gets USFDA approval, it will start exporting four medical devices to the US, which accounts for 25% of the global $70-80 billion medical device market.

Medical devices are intermediate products used for drug delivery or suction and generally made from plastics. Common medical devices include syringes, blood bags, catheter, cannula, infusion sets and fluid management products among others.

Currently, the Indian medical device market is about Rs 1,500 crore while about Rs 300-400 crore worth of medical devices are exported, mostly in unregulated markets. The sector is highly dominated by unorganised sector. Currently, Polymed exports its products to over 50 countries.

Polymed Medicure managing director Himanshu Baid told ET, “We expect to get USFDA nod by June or July. By 2010, our revenues from US is expected to be about $7-8 million which will be about 15% of our total revenue. For marketing our products in the US, we are also looking at partnerships.”

The company is also exploring strategic partnership with global MNCs, to manufacture medical devices in the country. The company has appointed consultants who are scouting for suitable global companies who could partner with the company, he added.

With the expansion of hospitals, primarily by the corporate hospitals in the country, medical devices sector is expected to grow by about 18% from the current 10-15 % by 2010. Polymed has entered into a JV with a local company in Egypt to capture the North African market and is looking for a similar JV in Europe and South America also.

Polymed is also putting up another facility in Haridwar to cater to the domestic market. Mr Baid said, “We are investing about Rs 30 crore for the Haridwar facility and the first phase will be operational by May. Polymed is also planning to set up another facility in Jaipur.” The company plans to fund the expansion through internal accruals and debt.