SPAN DIAGNOSTICS LTD - BUY

 

 

In a country like India with huge population ,healthcare industry is considered as a promising one and it is showing good growth rate in recent times.Increasing education level and  disposable income,better awareness and various health schemes of governments acting as the catalyst for this rapid growth .Availability of better hospital facilities and awareness of patients  increasing the potential of the players in medical diagnostic Industry.Periodic outbreak of various diseases at various parts of country ensures sustained business for this industry as a whole. Span Diagnostic is a strong player in this industry which is manufacturing and distributing various kinds of diagnostic/pathology lab devices, including sample test devices and regents.SPAN originally started its operations in 1973 as  as Desai Laboratories and changed its name to SPAN DIAGNOSTICS in 1980.This Surat based company having strong technical and marketing alliances with well known global  players like Hitachi Chemical Diagnostics USA,Technoclone GMBH Austria,Biotechnica Instruments Italy ..etc. and having a nationwide marketing network .  At present a major portion of company’s income is coming from reagents manufacturing business for  Immunology, Biochemistry, Microbiology, Serology  and Histopathology .Increasing trend of lifestyle related diseases ensuring sustained growth in this segment.Company is a market leader in testing kits for AIDS and Maleria and a major supplier of testing kits for  government sponsored health programmes. Span also having an approved facility for antibody productions and their purification.

                                                  Company reported steady growth till 2011 and rewarded its minority share holders accordingly .But in last year Span recorded a loss(excluding extra ordinary income) ,thanks to its wrong decision to devote money and effors for developing  its  medical equipments business and overall sluggishness in economy.I feel ,now company realised its mistakes and taking corrective steps .Their decision to sell Hematology analyzers  business to Nihon Kohden India Private Limited and concentrate in their core business of diagnostic reagent manufacturing is part of their changing strategy .In order to tap the export market  company started a joint venture Span Diagnostics South Africa (PTY) Limited with Reindus Health (Pty) Limited for increasing its presence in African Market. Company also planning to enter in US market in near future . SPAN is also planning to aggressively tap the contract manufacturing opportunities for regents.In latest September quarter company reported sharp improvement in its performance where sales increased from Rs.15 Cr to Rs.25 Cr and net profit improved sharply from Rs.56 lakhs to Rs.2.26 Cr .Quarterly EPS is Rs.3.16.To scale up its business to next level,company having plans to sell part of its stake to MNC’s at right valuation.Considering the huge potential of this industry and goodwill of this company we can’t rule out the possibility of such an alliance with global diagnostic majors .If such an alliance materializes that will re write the fortunes of SPAN. On good September results its stock price appreciated recently and now consolidated around Rs.40 .Those with a long term view  may consider SPAN @ CMP of Rs.43.

Link to company website HERE

Link to latest Annual Report  HERE