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Novartis: Operating margins disappoints - Views on News from Equitymaster
 
 
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  • Jul 27, 2001

    Novartis: Operating margins disappoints

    Novartis India has posted a net profit of Rs 92 m for 1QFY02 as against Rs 186 m in the corresponding quarter last year. However, the figures for the year are not comparable as the company demerged its agrochemical business, which resulted in this sharp decline in turnover and profits. The company also decided to exit the lens and lens care business of CibaVision with effect from December 2000 due to unviability of the same.

    (Rs m) 1QFY01 1QFY02 FY01
    Sales 2,106 1,024 4,033
    Other Income 66 46 308
    Expenditure 1,824 922 3,479
    Operating Profit (EBDIT) 282 102 554
    Operating Profit Margin (%) 13.4% 10.0% 13.7%
    Interest 4 2 7
    Depreciation 44 5 30
    Profit before Tax 300 142 825
    Extraordinary Income - -  
    Tax 114 50 299
    Profit after Tax/(Loss) 186 92 526
    Net profit margin (%) 8.8% 8.9% 13.0%
    No. of Shares (eoy) (m) 31.9 31.7 31.7
    Diluted Earnings per share* 23.3 11.5 16.6
    P/E (at current price) 17.5 12.2

    Though the topline figures are more or less in line with market expectations, the operating margins have been disappointing. We were expecting a growth in operating margins on the back of four products launched by the company recently across different therapeutic segments. It appears that company's top brand Voveran (an anti-inflammatory) has witnessed degrowth in absolute terms in the current quarter.

    At the current market price of Rs 202, the stock trades at 18 times 1QFY02 earnings. The future growth of the company depends on the success of the new products launched recently.

     

     

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