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Pfizer: Margins on the rise

Mar 19, 2002

Apparently, on the back of strong marketing push, Pfizer has logged a 6.6% topline growth in 1QFY03. The growth has been marginally better than our expectations. The highlight of the results was a sharp improvement in operating margins compared to the last year by more than 570 basis points.

(Rs m)1QFY021QFY03*% Change
Sales 749 798 6.6%
Other Income 127 121-4.7%
Expenditure 713 713 0.1%
Operating Profit (EBDIT) 36 85 133.5%
Operating Profit Margin (%)4.9%10.6%
Interest 11-61.5%
Profit before Tax 146 188 29.0%
Profit after Tax/(Loss) 88 120 37.3%
Net profit margin (%)11.7%15.1% 
No. of Shares (eoy) (m)23.423.4 
Diluted Earnings per share15.020.6 
P/E (at current price) 21.7 
*- 1QFY03- is for the quarter ending Feb'02.

The boost in sales and operating margins seem to be on the back two main reasons. One, the company's 'Corex' range of cough preparations which contribute around 30% of the company’s sales are logging 8%-9% growth rates. Further, inspite of strong competition new products like Magnex and Hepashield are selling at a premium.

At the current market price of Rs 446, the stock is trading at 22x FY03 expected earnings. The company is expected to be a major beneficiary of the recent DPCO dilution. Becosules, Pfizer's top selling brand is expected to come out of price control. Becosules enjoys a market share of around 25% in the Vitamin B market with a strong brand recall and one can expect a ramp up in margins if the product actually comes out of price control.

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