Grupo Dimed Stock (PNVL3) – Investment Analysis

Common Stock:  Grupo Dimed (PNVL3)

Current Market Price: R$ 26.55

Market Capitalization (Common + Preferred): R$ 3.9 billion

*All values in this article are expressed in Brazilian Reis (BRL) unless otherwise noted.

**The bulk of this analysis is based on the company’s most recent audited financial report, which can be found by following this link.

Grupo Dimed (PNVL3) - Stock Chart
Grupo Dimed (PNVL3) – Stock Chart

Grupo Dimed Stock – Summary of the Company

Grupo Dimed was formed in 2014 by joining three companies. Grupo Dimed has nearly 7,000 employees and is headquartered in the state of Rio Grande do Sul in Brazil. The company is focused on the southern region of Brazil.

Dimed - Market Locations year end 2018
Dimed – Market Locations year end 2018

-Panvel is a pharmacy that offers over 15,000 items. In 2019, the company opened 41 new locations, bringing total locations to 444 as of year-end 2019. Panvel has over 5 million clients registered to their loyalty program. The company has made significant investments into its e-commerce offering and in 2019 online sales represented 10% of Panvel’s sales.

-Dimed is a drug distribution company.

-Lifar is a manufacturing company that produces cosmetics, hygiene products, and food among other things. They manufacture items under the Panvel brand.

Revenue and Cost Analysis

Grupo Dimed had total revenue of R$ 2.8 billion in 2019, a significant increase over 2018 revenues of R$ 2.4 billion. COGS in 2019 were R$ 1.9 billion, representing a gross margin of 29%, on par with 2018’s gross margin of 30%.

The company has significant debt (discussed below). Financing expenses were R$ 42.9 million in 2019. Net income was R$ 76.7 million, representing a profit margin of 3%.

Balance Sheet Analysis

Dimed has a decent but not strong balance sheet. Liquidity levels are sufficient in the near term and liability levels are manageable, although the company did increase its debt significantly in 2019.

Grupo Dimed – Debt Analysis

As of year-end 2019 the company had total debt outstanding of R$ 186 million, almost all of which is classified as long term. The debt carries an interest rate of 108% of CDI.

Grupo Dimed - Debt Table
Grupo Dimed – Debt Table

Grupo Dimed Stock – Share Dynamics and Capital Structure

As of July 2020, the company had 138 million common shares outstanding and 13.5 million preferred shares outstanding. Total shares outstanding is around 151.5 million.

Grupo Dimed - Shares Outstanding
Grupo Dimed – Shares Outstanding

Grupo Dimed Stock – Dividends

The company pays a dividend equal to 25% of their net income. Preferred shares are guaranteed a dividend 10% greater than common shareholders.

Management – Skin in the game

Grupo Dimed does not have any one major shareholder controlling more than 10% of the company. However, individuals from several families combined hold a large minority stake in Dimed.

Grupo Dimed - Cap Table
Grupo Dimed – Cap Table

Grupo Dimed Stock – 3 Metrics to Consider

Debt to Equity Ratio

Total Liabilities/Total Share Holder Equity

R$944.8 million/ R$524.1 million = 1.8

A debt to equity ratio of 1.8 indicated that Dimed uses a significant amount of debt in its capital structure.

Working Capital Ratio

Current Assets/Current Liabilities

R$ 812.2 million / R$510.3 million = 1.6

A working capital ratio of 1.6 indicates a sufficient but not strong liquidity position. Dimed should not have a problem meeting its near-term obligations.

Price to Book Ratio

Current Share Price/Book Value per Share.

R$ 26.55/ R$3.46 = 7.7

Based on total shares outstanding Dimed has a book value per share of R$3.46. At the current market price of the company’s common stock this implies a price to book ratio of 7.7, meaning Dimed stock trades at a significant premium to the book value of the company.

Grupo Dimed Stock – Summary and Conclusions

Grupo Dimed is a vertically integrated medical distribution company. They own the manufacturing, distribution, and point of sale for pharmacy products. They have a large customer base and a growing e-commerce business. Brick and mortar stores are also increasing, growing nearly 10% year over year from 2018 to 2019.

The company appears to be well run. They return capital to shareholders while still making significant investments into their core business. The company is profitable and has manageable liability levels. Although a significant increase in debt is concerning.

Dimed is an interesting company and despite its low margins, I like it. Should its ecommerce business continue to grow, margins should improve. I will wait until I have looked at some of the other publically traded Brazilian pharmacies before making a decision.


This is not investment advice. Nothing in this analysis should be construed as a recommendation to buy, sell, or otherwise take action related to the security discussed. If I own a position in the security discussed, I will clearly state it.

This is not intended to be a comprehensive analysis and you should not make an investment decision based solely on the information in this analysis. I hope this serves as a useful starting point for a more comprehensive analysis, and hopefully draws attention to aspects of the company that were overlooked or merit further investigation. This is by no means intended to be a complete analysis. Again, this is not investment advice, do your own research.

Patrick Flood, CFA