X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2019 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Aventis: Geared for the patent regime - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Aventis: Geared for the patent regime

Jun 17, 2005

With the advent of the patent regime in India, MNC pharma companies stand to gain a lot in terms of new product launches and consequently increased revenues. Being an MNC, Aventis is all set to exploit this opportunity. In this article, we take a look at how the company has performed over the years and what lies ahead. Company profile
Aventis Pharma - the 50% subsidiary of Aventis SA, France, is the 2nd largest pharma MNC in India with a turnover of over Rs 7.4 bn (CY04). It is the 8th largest domestic player with a market share of 2.9%. Aventis has relatively few but very strong brands in the country. The company's key brands include Clexane, Targocid, Amaryl, Frisium and Cardace and the top 10 brands accounted for 76% of domestic sales in 2004. Domestic sales constituted 74% of total sales in 2004 and exports constituted the remaining 26%. Over the years, it has progressively transformed itself into a company catering to the chronic (diabetes, cardio vascular) and critical-care therapeutic segments. Apart from catering to the Indian markets, the company supplies bulk drugs to its parent. Recently, the parent merged with another France based pharma company, Sanofi, thus making it part of one of the largest pharma conglomerates in the world.

Numbers at a glance...
CY02 CY03 CY04 1QCY05
Net sales growth (%) 12.7% 5.8% 12.8% 3.8%
Operating profit margin (%) 15.8% 21.4% 29.2% 22.7%
Operating profit growth (%) -1.5% 43.7% 53.5% -1.7%
PBT margin (%) 14.6% 21.2% 29.9% 24.4%
Net profit margin (%) 9.9% 15.1% 20.2% 13.6%
Net profit growth (%) -8.4% 61.4% 50.6% -26.3%

The journey over the years
CY02: Topline registered a 13% YoY growth backed by a strong 27% YoY growth in exports and a 9% YoY growth in domestic sales. As far as exports are concerned, Russia (24%) and the CIS markets contributed significantly to Aventis' exports growth. As regards the domestic product portfolio, the top 10 brands accounted for 72% of domestic sales and clocked a 16% YoY growth. Growth was led by Clexane (44% YoY), Amaryl (41% YoY), Targocid (34% YoY) and Cardace (32% YoY). However, operating margins declined from 18% to 16% chiefly on account of a 16% YoY rise in expenditure.

It must be noted that during the year the company invested heavily in new medical and marketing activities to support and sustain the high growth achieved in strategic brands. Also, there was an 18% increase in raw material costs brought about by imposition of customs duties on Clexane and Cefrom consequently affecting margins. Reduction in the operating profits coupled with a fall in the other income component contributed to the 8% decline in bottomline.

CY03: Revenues grew by 6% YoY aided by the 7.5% YoY growth in domestic sales. This year, however, the company was not able to mirror the robust export growth witnessed in 2002. Exchange variance partly affected exports, which recorded only a marginal growth. Despite this, the operating margins registered an impressive 560 basis points increase to over 21% due to a combination of factors such as a better product mix, efficiencies in procurement of raw materials and reduced promotional expenditure. The bottomline, however, registered a much sharper YoY growth of 61% owing to a spurt in other income and extraordinary items. The company had received discounts from suppliers, which contributed to the rise in extraordinary income. On the new products front, the company made 2 new launches - 'Lantus' which is the world's first and only once a day insulin and 'Actonel', which is for the treatment of osteoporosis.

CY04: The year 2004 saw the merger of Aventis SA, France, with Sanofi-Synthelabo to form the entity Sanofi-Aventis. In 2004, revenues clocked a robust 13% YoY growth with the domestic sales recording a 7% YoY growth. However, after the dull performance of the previous year, exports staged a recovery and jumped 31% YoY and was again mainly driven by the CIS countries (31% YoY) and sourcing (41% YoY). Thus, strong exports growth coupled with some decrease in input costs aided the rise in operating margins by 780 basis points. All of this percolated to the bottomline, which registered a 51% YoY growth in 2004.

What to expect?
At 1,300, the stock is trading at a P/E multiple of 31.7 times its annualised 1QCY05 earnings. Apart from the domestic market, which seems to be doing pretty well, Aventis has an opportunity to scale up the contribution from exports in the future i.e. outsourcing to the parent. In fact, Aventis is the only major MNC pharma company, which has a clear-cut strategy on outsourcing. The company's exports as a percentage of sales have grown significantly (from 15% in CY00 to 26% in CY04) and are likely to go up further, as the company is investing in capacities to capitalize on this opportunity. Also, the company is aggressive as far as launching new products are concerned and will therefore be a major beneficiary in the patent regime when a slew of new products will be unveiled for the Indian markets. The company has also undertaken several brand awareness initiatives over the years, which will augur well for the company in terms of increased visibility for their products.


Equitymaster requests your view! Post a comment on "Aventis: Geared for the patent regime". Click here!

  

More Views on News

SANOFI INDIA 2017-18 Annual Report Analysis (Annual Result Update)

Apr 16, 2019 | Updated on Apr 16, 2019

Here's an analysis of the annual report of SANOFI INDIA for 2017-18. It includes a full income statement, balance sheet and cash flow analysis of SANOFI INDIA. Also includes updates on the valuation of SANOFI INDIA.

SANOFI INDIA Announces Quarterly Results (3QFY19); Net Profit Up 4.3% (Quarterly Result Update)

Mar 5, 2019 | Updated on Mar 5, 2019

For the quarter ended December 2018, SANOFI INDIA has posted a net profit of Rs 793 m (up 4.3% YoY). Sales on the other hand came in at Rs 7 bn (up 8.4% YoY). Read on for a complete analysis of SANOFI INDIA's quarterly results.

SANOFI INDIA Announces Quarterly Results (2QFY19); Net Profit Up 2.5% (Quarterly Result Update)

Nov 6, 2018 | Updated on Nov 6, 2018

For the quarter ended September 2018, SANOFI INDIA has posted a net profit of Rs 1 bn (up 2.5% YoY). Sales on the other hand came in at Rs 7 bn (up 11.4% YoY). Read on for a complete analysis of SANOFI INDIA's quarterly results.

Aster DM Healthcare (IPO)

Feb 10, 2018

Should you subscribe to the IPO of Aster DM Healthcare Ltd?

Shalby Ltd. (IPO)

Dec 2, 2017

Should you subscribe to the IPO of Shalby Ltd?

More Views on News

Most Popular

Stocks that Could Be Out of Reach Post Elections(The 5 Minute Wrapup)

Apr 9, 2019

It's a matter of time before the stocks catch the fancy of the markets and big investors.

3 Indian Stocks with Amazon-Like Potential(Profit Hunter)

Apr 10, 2019

We have identified 3 stocks with huge wealth building potential which meet our 'Click of a Button' criteria.

This Company is Making a Big Comeback and You Can Now Profit from Its Example(The 5 Minute Wrapup)

Apr 10, 2019

How Dell got its mojo back.

This is Why the Stock of Jubilant FoodWorks Went Up 1,160%(The 5 Minute Wrapup)

Apr 12, 2019

This critical business strategy has enabled companies to scale their operations faster.

Pocketing Massive Gains with HDFC And HDFC Bank(Profit Hunter)

Apr 12, 2019

Here's how one could have generated gains of Rs 59,250 in 10 days by trading HDFC and HDFC Bank with a capital of Rs 4 lakh.

More

Get the Indian Stock Market's
Most Profitable Ideas

How To Beat Sensex Guide 2019
Get our special report, How to Beat Sensex Nearly 3X Now!
We will never sell or rent your email id.
Please read our Terms

SANOFI INDIA SHARE PRICE


Apr 18, 2019 (Close)

TRACK SANOFI INDIA

  • Track your investment in SANOFI INDIA with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
  • Add To MyStocks

SANOFI INDIA 8-QTR ANALYSIS

COMPARE SANOFI INDIA WITH

MARKET STATS