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Hoechst: Better prospects post restructuring - Views on News from Equitymaster
 
 
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  • May 26, 2000

    Hoechst: Better prospects post restructuring

    Hoechst Marion Roussel (HMR) has reported a 35% growth in its bottomline. This was partly due to the contribution of other income of Rs 197 m. The company’s topline has however grown by only 1.4% to Rs 5324 m. This is primarily due to the fact that almost 60% of its revenues accrue from products that are under price control.

    Brand % of Sales Therapeutic Category
    Combiflam 9.0%  Anti–inflammatory
    Daonil (Oral) 10.0%  Anti–diabetic
    Insumin 5.0%  Anti–diabetic
    Typhoral 6.0%  Vaccine
    Avil 8.0%  Anti–allergic
    Dilosyn 3.0%  Anti–allergic
    Soframycin 7.0%  Topical antibiotic
    Novalgin 5.0%  Analgesic
    Baralgan M 11.0%  Analgesic
    Trental/Cardace 7.0%  Cardiovascular
    Rifater/Rifadin 2.0%  Anti–'TB
    Hostacycline 10.0%  Antibiotic

    HMR is a 51% subsidiary of the $ 14.6 bn Aventis (formed with the merger of HMR AG and Rhone Poulenc). The company has been one of the respected multinational pharmaceutical companies operating in India being the fourth largest player in the domestic market with strong products and a diversified product mix. The company’s brands such as Combiflam, Daonil, Avil, Soframycin, Baralgan–M and Novalgin are household names.

    Particulars FY1999 FY2000 Change
    Sales 5,251 5,324 1.4%
    Net Profit 204 275 34.8%

    The company has restructured its operations after the merger with Roussel. It sold two of its plants in high cost Mumbai and shifted to relatively low cost areas such as Goa (formulations plant) and Ankleshwar (bulk drugs production). The other income includes the proceeds from the sale of one of the plants in Mumbai. Besides, it also sold of its tailend brands such as Omnatax and Haemaccel to Nicholas Piramal last year. The proceeds from these are also included in its other income.

    The future growth in the topline is to led via the introduction of new products and the resumption in exports to Russia which contribute around 15% of the company’s turnover. HMR introduced new products such as Cardace (cardiovascular) Amaryl (an oral anti–diabetic), Cefrom (antibiotic) Frisium (anti–epileptic) etc. over the last two years which have been well received in the Indian market. In the future too it will have access to its parent Aventis’ product pipeline

    The stock currently quotes at a price of Rs 400, which implies a multiple 33 times. This is at the same level at which at the stock has quoted over the past two years.

     

     

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