MEMBER'S LOGINX
| Login Failure | ||||||||
|
||||||||
| Sign Up | Forgot Password? | ||||||||
- Home
- Outlook Arena
- Jan 23, 2013 - Novartis: Quite a poor performance
Novartis: Quite a poor performance
Novartis has announced its 3QFY13 results. The company has reported 5% YoY growth in sales, while net profits have declined by 24.5%. Here is our analysis of the results.
Performance summary
- Topline grows by 5% YoY during the quarter led by growth in the Pharmaceuticals, Animal Healthcare and Generic businesses.
- Operating margins witness sharp decline of 7% due to increase in raw material cost and operating expenses.
- Bottomline declines by 24.5% YoY during 3QFY13 largely led by lower topline growth and poor performance at the operating level.
| (Rs m) | 3QFY12 | 3QFY13 | Change | 9MFY12 | 9MFY13 | Change |
| Net sales | 2,223 | 2,335 | 5.0% | 6,414 | 6,904 | 7.6% |
| Expenditure | 1,844 | 2,102 | 14.0% | 5,182 | 6,090 | 17.5% |
| Operating profit (EBDITA) | 379 | 234 | -38.4% | 1,232 | 814 | -33.9% |
| EBDITA margin (%) | 17.0% | 10.0% | 19.2% | 11.8% | ||
| Other income | 190 | 199 | 4.3% | 560 | 613 | 9.4% |
| Interest (net) | 1 | 5 | 666.7% | 3 | 6 | 81.3% |
| Depreciation | 8 | 11 | 39.5% | 19 | 26 | 35.1% |
| Profit before tax | 561 | 417 | -25.7% | 1,770 | 1,396 | -21.1% |
| Tax | 177 | 127 | -28.4% | 579 | 443 | -23.4% |
| Profit after tax/(loss) | 384 | 290 | -24.5% | 1,191 | 952 | -20.0% |
| Net profit margin (%) | 17.3% | 12.4% | 18.6% | 13.8% | ||
| No. of shares (m) | 32.0 | |||||
| Diluted earnings per share (Rs) | 40.2 | |||||
| Price to earnings ratio (x)* | 16.2 |
What has driven performance in 3QFY13?
- Net sales for the quarter grew by 5% YoY led by growth in Pharmaceuticals, Animal Healthcare and Generic businesses. The Pharmaceutical segment, which contributes 70% to total revenues, witnessed tepid growth of 5% YoY. Animal segment witnessed decent growth of 14% YoY. This segment contributes 10% to total revenues.
- Novartis' operating margins decreased by 700 bps (7%) to 10% during the quarter due to overall increase in manufacturing and operating expenses.
Revenue break-up (Rs m) 3QFY12 3QFY13 % Change 9MFY12 9MFY13 % Change Pharmaceutical 1,532 1,618 5.6% 4,489 4,924 69.3% Margins 21.8% 9.6% 24.6% 6.6% OTC 342 323 -5.6% 878 805 13.8% Margins 20.8% 17.9% 16.7% 6.4% Animal Health 207 237 14.5% 614 713 10.1% Margins 6.9% 2.6% 8.9% 1.9% Generics 142 157 10.6% 433 463 6.7% Margins 40.5% 48.9% 35.8% 8.9% Grand Total 2,223 2,335 6,414 6,904 - In terms of segments, the big fall in overall margins was mainly due to rising costs in the pharmaceutical and animal health businesses. However, the generic segment witnessed huge jump in margins. The margins for this segment increased by 8% in 3QFY13. The margins of the OTC segment declined by at 2% YoY during 3QFY13.
- Led by the tepid growth in sales and poor performance at the operating level, net profits fell by 24% YoY.
What to expect?
At the current price of Rs 650, the stock is trading at a multiple of 12 times our estimated FY15 earnings. In light of the company's current performance, we remain cautious on its Pharmaceutical business which is the major contributor to sales. However, there is a high probability of surprises coming from its Generics segment. The Animal Health businesses and OTC segment on the other hand are facing stiff competition. At the current market price, the stock does not leave much on the table for investors. We have a Sell rating on the stock.OUR TOP 5 IDEAS
- Free Guide on How to Profit from Sensex 100,000.
- A Simple Test to Find out If a Stock Has 100x Potential
- A Guide to some of the Most Lucrative Stocks in the Market. Download For Free!
- Are You Making One of These 15 Costly Mistakes While Investing. Learn more!
- Revealed: Top 7 Stocks to Consider Buying Right Now...
NOVARTIS SHARE PRICE
Jan 24, 2020 (Close)
TRACK NOVARTIS
- Track your investment in NOVARTIS with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
- Add To MyStocks
MORE ON NOVARTIS
NOVARTIS - FRESENIUS KABI ONCO. COMPARISON
COMPARE NOVARTIS WITH
OTHER USEFUL LINKS
MARKET STATS
ABOUT EQUITYMASTER
Since 1996, Equitymaster has been the source for honest and credible opinions on investing in India. With solid research and in-depth analysis Equitymaster is dedicated towards making its readers- smarter, more confident and richer every day. Here's why hundreds of thousands of readers spread across more than 70 countries Trust Equitymaster.
FREE NEWSLETTERS
PREMIUM PRODUCTS
QUICK LINKS
APPS
Copyright © Equitymaster Agora Research Private Limited.
Whitelist | Refer | Terms | Privacy | Contact | About | Sitemap
Equitymaster Agora Research Private Limited (Research Analyst) 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
All rights reserved. Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.
LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (Research Analyst) bearing Registration No. INH000000537 (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA, Canada or the European Union countries, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.
SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.