Brooks Laboratories Limited manufactures and sells pharmaceuticals on contract basis in India and internationally. It offers carbapenem drugs; tablets; dry syrup; liquid and dry power injections; and eye and ear drop. Brooks Laboratories Limited was incorporated in 2002 and is based in Mumbai, India.

India

Brooks Laboratories Limited

Healthcare

The company does not pay dividends at all, or it pays them sporadically. There have only been a few years with dividend payments in the past ten years. 

BROOKS.NS reported revenue of INR 949mn in the last 12 months, up 27% from FY23. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. EPS grew 37% from FY23 to INR -7.73.

The stock's performance has been mixed in the past six months, with growth following a decline. There is no clear price trend compared to its global peers from the same sector and industry (as shown above). The stock has outperformed this peer group by 4ppts over past six months and grown 8ppts slower in the past month. This is largely true for peers from the same country and sector. With respect to the stock's valuation against its peers, its overall price performance is neutral.

The company has reported very poor EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to -7.7% in the last 12 months, a decline from -5.7% in FY23. 

Historically, BROOKS.NS has reported very poor net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled -21.7%, down from -19.2% in FY23. 

In the last 12 months, the return on capital employed (RoCE) declined to -31.7%, below the peers. 

Brooks Laboratories Limited reported a return on equity (RoE) of -32.9% in the last 12 months, down from -20.5% in FY23. 

Another important profitability metric, return on assets (RoA), amounted to -22.6% in the last 12 months, a decrease from -14.3% in FY23. 

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been -2.9 in the past several years. This ratio implies a fragile shareholder value creation. 

The institutional, legal, and compliance risks associated with the company's country are close to minimal. In combination with rigorous business standards, shareholder rights are well protected.

BROOKS.NS has very poor trading liquidity. It will take considerable time for the average private investor to sell a common position under normal market conditions. Liquidity may be unstable and becomes extremely unfavourable on the days with the lowest activity. The trading volume mostly stays the same even under highly turbulent market conditions. The stock has a tiny market capitalisation, which usually makes its trading liquidity erratic and unpredictable. 

No other major risks have been identified.

The risk of default is moderate. We note low margin volatility and an favourable capital structure, among the positive credit factors. Among the negative credit factors, we point to weak positions in its industry, slow historical revenue growth, bleak profitability, negligible return on capital, inadequate interest coverage, and poor cash flow generation.

In highly turbulent market conditions, BROOKS.NS is as volatile as an index. In other words, the stock will move with the index in times of extreme market volatility or shocking company news. Standalone, the worst-day losses (less than 1% of the time) will likely be limited. 

In normal market circumstances, BROOKS.NS is volatile. Put differently, without outstanding market volatility or shocking company news, the stock's price will move much wider than the index. The stock's losses on its worst days (less than 1-5% of the time) will range from moderate to notable. We would also like to highlight the notable intraday volatility of the instrument. 

Considering past and projected metrics, the stock is distinctly 'expensive' compared to its peers. 

Brooks Laboratories Limited

₹ 138

2

Brooks Laboratories Limited

₹ 138

2

Risk factor

Profitability factor

Risk / Profitability

Risk factor

Profitability factor

₹ 138

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