Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Wockhardt: Europe led 2004 - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Feb 10, 2005

    Wockhardt: Europe led 2004

    Performance Summary
    Domestic pharma company, Wockhardt, recently declared its December quarter as well as full year numbers. In 4QCY04, the company's consolidated revenues clocked a buoyant 21% growth led by strong performance in Europe and rest of the world. Its bottomline growth was equally buoyant at 26% YoY. The company ended the full year with over 31% revenue and nearly 50% bottomline growth.

    (Rs m) 4QCY03 4QCY04 Change CY03 CY04 Change
    Net sales 2,838 3,438 21.1% 9,420 12,389 31.5%
    Expenditure 2,242 2,697 20.3% 7,626 9,577 25.6%
    Operating profit (EBDITA) 596 741 24.3% 1,794 2,812 56.7%
    Operating profit margin (%) 21.0% 21.6%   19.0% 22.7%  
    Other income 65 152 133.8% 74 158 113.5%
    Interest (27) (119) - 4 (17) -
    Depreciation 83 99 19.3% 267 368 37.8%
    Profit before tax 605 913 50.9% 1,597 2,619 64.0%
    Extraordinary expenditure - (113) - - (113) -
    Tax 102 168 64.7% 171 371 117.0%
    Profit after tax/(loss) 503 632 25.6% 1,426 2,135 49.7%
    Net profit margin (%) 17.7% 18.4%   15.1% 17.2%  
    No. of shares (m) 72.6 109.0   72.6 109.0  
    Diluted earnings per share (Rs)*       13.1 19.6  
    P/E ratio (x)         19.2  
    (* annualised)            

    What’s the company’s business?
    Wockhardt is one of the leading domestic pharma companies with strong presence in the lifestyle segment and growing focus on biotechnology. The company, a few years back, was focused on the domestic market, but intense price competition and price regulations resulted in the company gradually shifting its focus to exports. Consequently, Wockhardt acquired two UK-based companies Wallis Laboratories and CP Pharma. The company now derives 60% of its revenues from non-India regions. The company has proven its R&D capabilities by indigenously developing and launching Biovac-B (hepatitis - B) vaccine, Wepox (Erythropotein) and Wosulin (human insulin).

    What has driven performance in CY04?
    Europe potion: Though European growth has slowed down post the acquisition spurt, the region still clocked a healthy 29% revenue growth. Just to put things in perspective, the revenues from European business in June quarter last year were Rs 333 m, while the revenues in September quarter 2003 significantly increased to over Rs 1 bn, led by the acquisition of CP Pharma. For the full year, the region grew by a significant 77% YoY and now forms 42% of Wockhardt’s revenues. In May 2004, Wockhardt acquired ‘esparma GmbH’ to give its German plans a fillip. Incidentally, Germany is the largest branded generics market in Europe.

    US – The emerging driver: Going forward, the company's growth is likely to gain momentum in the US, where it launched 3 new products under the Wockhardt banner during third quarter of 2004. While the US market grew by a staid 3% in September quarter, in December quarter it displayed signs of picking up pace with nearly 10% revenue growth. US accounted for 8.3% of consolidated CY04 revenues. The region’s share in the pie is likely to go up over the next couple of years.

    Home score: The sales in the domestic market were up 10% during the quarter and over 13% in CY04. The field force re-structuring in the domestic market, as well as buoyancy in the lifestyle segment (biotechnology, Nephrology, Diabetology) has helped company beat the industry growth rate. The 30 power brands of the company, which constitute 80% of the domestic revenue, grew by 15% in CY04. Also, the revenues from its biotech portfolio grew by 81% YoY during CY04. Wepox (Erythropoeitin) is growing at 47% plus and Wosulin, which has completed one year of its launch, increased its market share to about 6%-7% in domestic insulin market.

    Geographical Mix…
    (Rs m) 4QCY03 4QCY04 Change CY03 CY04 Change
    India 1,057 1,164 10.1% 4,342 4,916 13.2%
    Europe 1,219 1,574 29.1% 2,938 5,206 77.2%
    US 304 334 9.9% 1,077 1,033 -4.1%
    Rest of World 259 365 40.9% 1,064 1,233 15.9%
    Total 2,839 3,437 21.1% 9,421 12,388 31.5%

    Margin story: The operating profit grew faster than the revenues. The basic reason for this is the increased contribution from the European markets, where margins are higher, as also the benefits of restructuring. Increased contribution from the high margin formulations business has also expanded operating margins. However, this margin profile is likely to be affected once competition picks up in the European markets. Also, company's recent entry into the US market on its own will affect the margins, as the cost of establishing sales and marketing network will take its toll, atleast in the near term.

    Business Mix…
    (Rs m) 4QCY03 4QCY04 Change CY03 CY04 Change
    Formulations 2,439 2,956 21.2% 7,778 10,616 36.5%
    Bulk Drug 400 482 20.5% 1,643 1,772 7.9%
    Total 2,839 3,438 21.1% 9,421 12,388 31.5%

    Tax provision and extraordinary expenses: Net profit grew by 26% in the quarter and by 50% in CY04. The company has recently issued FCCB's (Foreign currency convertible bonds) worth US$ 110 m. The interest charges are likely to increase owing to increased borrowings for funding acquisitions. Moreover, as the company’s contribution from the European operations pick up, the tax outgo could increase, as effective taxes are higher in those countries. The extraordinary expense of Rs 113 m in 4QCY04 as well as CY04 pertains to restructuring expenses in UK, as well as cost of setting up the US office.

    Over the last few quarters…

    The company has achieved robust growth on the back of its inorganic strategy over the past few quarters. Apart from this, changing geographical mix and streamlining of operations has helped Wockhardt to maintain healthy margins over the last few quarters.

    What to expect?
    At Rs 376, the stock is trading at 19 times CY04 earnings. Wockhardt, despite its past strong presence in the domestic market, has failed to capitalise on the same over the years. But with its recent focus on the international markets and some prudent acquisitions in Europe, growth prospects look promising. The company has achieved significant topline and bottomline growth in CY04, basically on the back of inorganic growth and restructuring moves. Further benefits of the restructuring are likely to filter in during 2005. The business strategy looks viable. We will update our report on the company soon.



    Equitymaster requests your view! Post a comment on "Wockhardt: Europe led 2004". Click here!


    More Views on News

    Sun Pharma: Bottomline Slips into the Red Amidst Challenging Environment (Quarterly Results Update - Detailed)

    Aug 14, 2017

    A challenging environment and one-time expense pushes Sun Pharma into a loss in the first quarter.

    Lupin: Bigger Challenges or Bigger Margin of Safety? (Quarterly Results Update - Detailed)

    Aug 14, 2017

    GST impact coupled with price erosion in US leads to lower profits for the quarter.

    Dr Reddy's: US Pressure Continues to Haunt (Quarterly Results Update - Detailed)

    Aug 8, 2017

    Profits plunge due to higher raw material costs.

    Biocon: Lower Licensing Income Leads to Muted Growth for the Quarter (Quarterly Results Update - Detailed)

    Jun 23, 2017

    Net Profit lower due to exceptional items in the previous year.

    Sun Pharma: Price Erosion in US Impacts Growth (Quarterly Results Update - Detailed)

    May 30, 2017

    US markets decline while other geographies grow in the quarter.

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    Proxy Plays: A Smart Way to Bet on 'Off Limits' Companies(The 5 Minute Wrapup)

    Aug 4, 2017

    The small-cap space is full of small players that are clear proxies to great growth stories and Indian megatrends.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    Copyright © Equitymaster Agora Research Private Limited. 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 (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 or Canada, 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.

    Equitymaster Agora Research Private Limited. 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

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms


    Aug 17, 2017 03:37 PM


    • Track your investment in WOCKHARDT LTD. with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
    • Add To MyStocks



    Compare Company With Charts