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Pfizer India: First quarter of Wyeth consolidation - Views on News from Equitymaster

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  • Jul 16, 2015 - Pfizer India: First quarter of Wyeth consolidation

Pfizer India: First quarter of Wyeth consolidation
Jul 16, 2015

Pfizer India has announced its 4QFY15 results. The company has reported an 81.3% YoY growth in net sales and a decline of 23.8% YoY in net profits. Here is our analysis of the results.

Performance summary
  • Net sales were up by 81.3% YoY. The operating margins stood at 26.9% for the quarter. The net profits were down by 23.8% YoY.
  • Please note, this is the first quarter post amalgamation with Wyeth, hence the financials are not comparable. In the subsequent paragraphs, we will discuss the adjusted growth and key highlights in this consolidation.

Financial performance: A snapshot
(Rs m) 4QFY14 4QFY15 Change FY14 FY15 Change
Net sales 2,517 4,563 81.3% 10,043 18,277 82.0%
Other operating income 228 68 -70.2% 1,075 256 -76.2%
Expenditure 2,016 3,383 67.8% 8,733 14,703 68.4%
Operating profit (EBDITA) 729 1,248 71.1% 2,385 3,830 60.6%
EBDITA margin (%) 26.6% 26.9%   21.5% 20.7%  
Other income 163 188 15.1% 1,094 674 -38.4%
Interest (net) 1.9 1.7 -10.5% 4 8 113.9%
Depreciation 20 336 1557.1% 80 1,311  
Profit before tax 870 1,097 26.1% 3,396 3,185 -6.2%
Exceptional Item - -   - (804)  
Tax 310 671 116.5% 1,188 1,377 15.9%
Profit after tax/(loss) 560 427 -23.8% 2,208 1,004 -54.5%
Net profit margin (%) 20.4% 9.2%   22.0% 5.5%  
No. of shares (m)       29.8 29.8  
Diluted earnings per share (Rs)         34.8  
Price to earnings ratio (x)*         60.8  
* On a trailing 12 months basis

What has driven performance in 4QFY15 and FY15?
  • On like to like basis, Pfizer’s sales including Wyeth for the full year grew by 12% YoY. One of Pfizer’s key products Corex (Codeine) has been facing regulatory challenges in some geographies in India. This had impacted the sales for the quarter. Excluding Corex, the growth is 14% YoY. For the quarter, the growth was 6% YoY for Pfizer. This was largely driven by Gelusil, which was promoted through credit schemes.

  • The EBITDA margins for the year stood at 21% on a like to like basis.

  • Further, excluding the incremental impact of depreciation of approx Rs 1,180 m for the year and VRS related costs of Rs 800 m, the bottom line has grown by 17% YoY.

  • Post amalgamation, the equity share capital for Pfizer has increased to 45.7 m shares from 29.8 m shares. This is post Pfizer allotted 15.9 m shares to Wyeth shareholders.
What to expect?

At the current price of Rs 2,116 the stock is trading at a multiple of 24 times our estimated FY17 earnings.

Since some time, the growth of MNC pharma companies has remained under pressure. However, the performance improved during the quarter. As per IMS data, the MNC pharma pack grew by 7.8% in March 2015.

Post consolidation with Wyeth, Pfizer will be able to benefit from a better portfolio.

However, since the Indian government is aggressively taking steps to bring drugs under pricing regulations, this can have negative impact. We shall soon update our FY18 estimates and target price for the company. Till then, investors can continue to Hold on to the stock of Pfizer.

We would like to gently remind you that your allocation to equities should be decided upon after keeping aside some safe cash. Also within your overall exposure to equities please ensure that you broadly follow suggested asset allocation and that no single stock comprises 5% of your portfolio.

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