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Wockhardt: Impressive performance

Feb 12, 2002

Wockhardt Ltd has declared encouraging results for FY02. While sales have grown by more than 16%, net profit forged ahead by 43% to more than a Rs 1 bn. This was mainly on the back of an impressive 300 basis points rise in operating margins. However, interest cost shot up considerably to Rs 38 m. On a consolidated basis, sales for the quarter grew by 14% to Rs 2 bn while profits grew by 37%.

(Rs m)4QFY014QFY02ChangeFY01FY02Change
Net sales 1,492 1,779 19.2% 5,585 6,494 16.3%
Other Income - 5 - 53 36 -32.1%
Expenditure 1,236 1,384 12.0% 4,636 5,178 11.7%
Operating Profit (EBDIT) 256 395 54.3% 949 1,316 38.7%
Operating Profit Margin (%)17.2%22.2% 17.0%20.3% 
Interest 4 28 - 135 144 6.7%
Depreciation 24 35 45.8% 97 122 25.8%
Profit before Tax 228 337 47.8% 770 1,086 41.0%
Other Adjustments - -   - -  
Tax 19 12 -36.8% 54 64 18.5%
Profit after Tax/(Loss) 209 325 55.5% 716 1,022 42.7%
Net profit margin (%)14.0%18.3% 12.8%15.7% 
No. of Shares (eoy) (m) 36.3 36.3   36.3 36.3  
Diluted Earnings per share 23.0 35.8   19.7 28.2  
P/E (at current price) 13.6  17.3 

The growth was mainly driven by aggressive new product launches in the domestic market and increasing penetration on the exports front. The company's exports grew by 41% during the year to Rs 2 bn. This was driven by over 85% growth in value-added formulations, accounting for almost a third of Wockhardt’s exports. Wockhardt's international business (including Wallis) now constitutes 35% of the total turnover and is growing rapidly. During the year, Wockhardt significantly expanded the manufacturing capacities of its bulk-actives 'Dextropropoxyphene' and Vitamin B12. These would enable Wockhardt to maintain the current growth rates by capturing a larger slice in the global market.

Two biotech products of the company viz. 'Biovac' (Hepatitis B vaccine) and 'Epox' (Erythopoetin) grew by more than 100% during the year. Biotech business now accounts for almost 10% of the company's turnover.

(Rs m)4QFY014QFY02*ChangeFY01FY02*Change
Formulations- Branded 921 1,008 9.4% 3,556 3,973 11.7%
Formulations- Generics 93 75 -19.4% 471 375 -20.4%
Exports 382 589 54.2% 1,212 1,712 41.3%
Bulk Drugs- Domestic 93 107 15.1% 346 433 25.1%
TOTAL 1,489 1,779 19.5% 5,585 6,493 16.3%
*period ending December'01

The rise in operating margins and performance of the key products of the company are impressive. At the current market price of Rs 486, the stock trades at a P/E multiple of 17x FY02 earnings. The stock seems to be fairly valued when compared to its peer companies like Dr. Reddy's and Ranbaxy.

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