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Knoll Pharma: Consolidating operations - Views on News from Equitymaster
Knoll Pharma has declared a 33% drop in net profits for the year ended November'01. The company has changed its accounting year from December to November year ending. Hence the latest results are not strictly comparable as this year of the company was for a period of 11 months.
(Rs m)
FY01
FY02
% Change
Sales
3,333
3,246
-2.6%
Other Income
310
166
-46.5%
Expenditure
2,860
2,720
-4.9%
Operating Profit (EBDIT)
473
526
11.1%
Operating Profit Margin (%)
14.2%
16.2%
14.1%
Interest
15
1
-91.8%
Depreciation
53
45
-15.9%
Profit before Tax
715
646
-9.7%
Extraordinary Income
132
-
Tax
125
159
27.4%
Profit after Tax/(Loss)
722
487
-32.6%
Net profit margin (%)
21.7%
15.0%
No. of Shares (eoy) (m)
16
16
Diluted Earnings per share*
44.6
30.1
P/E (at current price)
10.2
(*- annualised)
On an annualised basis however, sales have registered a growth of more than 6%. Operating margins showed a good improvement of 200 basis points. The jump in operating margins was on the back of upward revision of four formulations of Insulin injection in March. Insulin Vial prices have increased by 22% - 25% since then. Insulin is the biggest revenue churner for Knoll where the company has a market share of close to 60%. Other income was on account of sale of mutual fund units of Rs 58 m and dividend received from wholly owned subsidiary.
Knoll Pharma seems to be in a consolidation mood. The company is in the process of taking shareholder permission to sell/divest its manufacturing unit at Pune and for the buyback of its shares. It plans to sell its plant as a going concern. It is proposing buyback of shares at a maximum price of Rs 350 per share. The markets however, seem to have sensed the proposal ahead of time, with the stock price appreciating more than 30% in last two months.
Knoll Pharma has also proposed 100% dividend i.e. Rs 10 per share. The stock currently trades (cum dividend) at Rs 308. Considering, the dividend the stock still trades at 15% discount to the buyback price proposed by the company.The buyback however, is dependent on shareholder's approval.
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