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E Merck: Impressive results from the vitamin king - Views on News from Equitymaster

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E Merck: Impressive results from the vitamin king

Jul 21, 2000

E Merck has reported an impressive growth of 79% in net profits at Rs 113.61 million for the quarter ended June 30, 2000 over the same period in the last fiscal. This, despite the fact that the sales have grown by 9.85% only. A part of the reason for this growth is that the company had written off VRS expenditure paid to the workers when it closed its Taloja plant. Besides, E Merck repaid a part of its borrowings last year, which has also contributed to the surge in the bottomline.

(Rs m) 1QFY00 1QFY01 Change
Sales 721 791 9.8%
Other Income 17 9 -48.9%
Expenditure 625 628 0.6%
Operating Profit (EBDIT) 96 163 70.0%
Operating Profit Margin (%) 13.3% 20.6%  
Interest (net) 9 (1)  
Depreciation 17 15 -12.9%
Profit before Tax 87 158 81.5%
Other Adjustments      
Tax 23 44 87.7%
Profit after Tax/(Loss) 63 114 79.2%
Net profit margin (%) 8.8% 14.4%  
No. of Shares (m) (eoy) 16.8 16.8  
Diluted no. of shares (m) 16.8 16.8  
Diluted Earnings per share* 15.1 27.0  
*(annualised)      

The company produces vitamins Evion, Neurobion and Polybion which are leaders in their respective categories. These contribute almost 45% of the company's turnover. All the three are under price control and are likely to remain that way for some time to come.

However, the company’s new launches, i.e. Candistat capsules, a modern antibacterial, and Harpoon tablets, a quinoline antibiotic, are doing very well. Evion cream launched last year is also doing well. Thus the non-vitamin segments have been showing improvement in the turnover while the vitamin segment reamins a major contributory factor to the turnover.

In the non-pharma divisions, all the business units have done well in the turnover as well as profitability. The new product range has been included in the Reagents and Diagnostics range. Manufacturing and marketing of vitamin/mineral premixes for food industry, addition of products for filtration, electronic balances, water purification systems, testing equipment for food and gas industry and substantial expansion of product range of laboratory reagents are some of the new introductions in the non-pharma division.

The stock quotes at a price of Rs 365, which implies an earning multiple of 18.7 times its annualised earnings for the year ending December 2000.


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