Novartis India: Outpaces industry once again - Views on News from Equitymaster

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Novartis India: Outpaces industry once again

Jul 29, 2000

A 12% growth in the topline has led to a commensurate growth in the bottomline for Novartis India. While the operating margins have improved, higher depreciation has nullified the rise in operating margins.

(Rs m)1QFY001QFY01Change
Sales 1,879 2,106 12.1%
Other Income 53 66 24.5%
Expenditure 1,633 1,824 11.7%
Operating Profit (EBDIT) 246 282 14.6%
Operating Profit Margin (%)13.1%13.4% 
Interest 5 4 -20.0%
Depreciation 28 44 57.1%
Profit before Tax26630012.8%
Other Adjustments   
Tax 100 114 14.0%
Profit after Tax/(Loss) 166 186 12.0%
Net profit margin (%)8.8%8.8% 
No. of Shares (m) (eoy)31.931.9 
Diluted no. of shares (m)31.931.9 
Diluted Earnings per share*20.823.3 
*(annualised)   

The company has already announced the demerger of the agrichemical business and a 2:1 split (which implies a face value of Rs 5). This would become effective with retrospective effect from April 1, 2000. The current quarter's results however include the operations of the agrichemical division.

Once the split becomes effective the company's operating margins are expected to improve to levels of 16% plus. The inventory and the debtors can also be expected to reduce to levels of around 45 days from the present levels of around 70 days.

The stock quotes at a level of Rs 887 which implies an earning multiple of 38 times FY2001 earnings. The stock has shot up almost 43% in the last two months since the spin off of the agribusiness and 2:1 split was announced.

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