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Aventis Pharma: Impressive performance

Mar 19, 2004

Aventis Pharma has reported 5.8% YoY growth in topline during year ended December 2003. The bottomline growth was much faster at 61% YoY. Aventis clocked a 9.6% topline and a significant 81% bottomline growth during the quarter ended December. Let's take a detailed look at the financial performance of the company.

(Rs m)4QFY034QFY04ChangeFY03FY04Change
Net Sales1,5761,7289.6%6,1576,5165.8%
Other Income263119.2%9816063.3%
Operating Profit (EBDIT)26646173.3%9721,39743.7%
Operating Profit Margin (%)16.9%26.7% 15.8%21.4% 
Interest 02 42-50.0%
Profit before Tax25444976.8%9161,38150.8%
Extraordinary income-50 -970 
Profit after Tax/(Loss)16830481.0%61198661.4%
Net profit margin (%)10.7%17.6% 9.9%15.1% 
No. of Shares (m)2323 2323 
Earnings per share (Rs)*7.313.2 26.642.9 
P/E (x)    15.6 

The growth in the topline of the company in December quarter was in line with the industry growth. Some of the power brands of the company such as Cardace, Targocid, Combiflam, Avil and Soframycin fuelled the growth in the topline. These brands also continued to maintain the leadership in their respective segments. First half of the year 2003 was sluggish in growth terms for the whole pharma industry. Despite this, the performance of Aventis is commendable owing to strong bottomline growth.

Cost Break Up
As a % of salesFY03FY04
Raw material 54.1%50.3%
Staff cost8.3%8.4%
Total Expenditure84.2%78.6%

A look at the table above reveals that a lot of this cost efficiency has been contributed by the shrinking of raw material costs as a percentage of sales. This also indicates a shift in the company's product profile towards higher margin products.

Continuing with its strategy of aggressive new product launches from its parent's product portfolio, Aventis Pharma introduced 'Lantus', the world's only 24-hour basal insulin in the anti–diabetics segment in the first half of the year. Considering that the new patent regime is going to be implemented from 2005, more such launches seems to be on anvil. These launches are likely to be one of the major growth drivers for the company going forward.

At Rs 667 Aventis Pharma is trading at a P/E of 15.6x FY04 earnings. With the new patent regime coming likely to come into force just 9 months from now, the company's aggressive new product launches and the resultant new product portfolio, declining DPCO cover and focus on lifestyle segments, we remain positive about the long-term prospects of the company. However, although Aventis Pharma has been successfully charging a premium for its products, the sustainability of the same in view of the rising competition in the domestic market remains a concern.

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