The restructuring exercise at Aventis is finally through and the results of the same are partially evident in FY02 results. Aventis has reported steady rise in operating margins during all the quarters of last year. The key brands of the company have logged attractive growth numbers inspite of stiff competition and the new product pipeline ahead seems to be exciting.
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The performance of the company is line with our expectations. The results are however, are not comparable on a like to like basis as the last financial year comprised of only 9 months. Further, the company has also merged its subsidiary Rhone Poulenc Rorer with effect from April'01. Exceptional charges of Rs 159 m came in due to amortisation of VRS expenses, whereas there has been an exceptional income of Rs 151 m on account of surrender of tenancy and development rights for a portion of the company's land.
On a like to like basis, sales has registered a growth of 7%. Growth has been fuelled by growth of its key brands, Cardace (70%), Allegra (45%), Amaryl (56%) and Tavanic (55%). Exports registered an encouraging growth of more than 30%, ahead of our expectations. The company has also launched Arava, which is a US$ 250 m + brand for the parent company globally.
The product introduction from the parent company has remained strong in case of Aventis Pharma. With the merger of its subsidiary Rhone Poulenc Rorer, Aventis Pharma product portfolio now boasts of 11 of the top 14 products of the parent company. The parent company is also expected to launch its new anti-diabetes product 'Lantus' in mid 2003. 'Lantus' has already met with good success in US and Europe.
At the current market price of Rs 370, the stock trades at a P/e of 11x its FY03 expected earnings which is at a discount when compared to its peers. Inspite of a strong performance and encouraging product pipeline, the stock price has remained lackluster. This is due to the lack of clarity over the recent DPCO order. While it would be futile to bet over the exact implications of the DPCO order, the negatives seem to be discounted in the current price. Any positive development on this front, could be a strong point for a re-rating of the stock.
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