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Wockhardt: Swift progress - Views on News from Equitymaster
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  • Jul 30, 2002

    Wockhardt: Swift progress

    Wockhardt Ltd. has declared encouraging results for 1HFY03. While sales have grown by more than 20%, net profit forged ahead by 37%. The impressive performance in sales is on the back of strong growth in export formulations and key brands in the domestic market.

    (Rs m) 2QFY02 2QFY03 % Change 1HFY02 1HFY03 % change
    Net sales 1,688 1,937 14.8% 2,992 3,590 20.0%
    Other Income 12 5 -58.3% 11 6 -45.5%
    Expenditure 1,383 1,540 11.4% 2,440 2,880 18.0%
    Operating Profit (EBDIT) 305 397 30.2% 552 710 28.6%
    Operating Profit Margin (%) 18.1% 20.5%   18.4% 19.8%  
    Interest 42 18 -57.1% 78 38 -51.3%
    Depreciation 30 32 6.7% 57 65 14.0%
    Profit before Tax 245 352 43.7% 428 613 43.2%
    Tax 18 44 144.4% 28 67 139.3%
    Profit after Tax/(Loss) 227 308 35.7% 400 546 36.5%
    Net profit margin (%) 13.4% 15.9%   13.4% 15.2%  
    No. of Shares (eoy) (m) 36.3 36.3   36.3 36.3  
    Diluted Earnings per share 25.0 33.9   22.0 30.1  
    P/E (at current price)   13.9     15.7  

    Exports have registered a significant 44% growth in sales, now contributing more than 36% of the company's total sales. The growth in exports was mainly fuelled by increase in production capacity of Vitamin B12 and alliance with Ranbaxy. It may be recalled that the Wockhardt entered into a multi-product development, supply, sales and marketing alliance with Ranbaxy Labs. The alliance has introduced two products in the US markets (Enalapril and Ranitidine).

    The increase in depreciation has been on account of new bio-technology manufacturing facility being set up by the company in Aurangabad to manufacture bio-technologically derived products. The company has incured Rs 169 m capex on this facility till date.

    The biotech products of the company continue to log attractive growth rates. Wockhardt is expecting one product introduction every year from its biotech division. Besides these, the product lineup of the company seems to be strong with various combinational vaccines, typhoid vaccine and other drugs in lifestyle therapeutics (chronic segment). However, the company is expected to face stiff competition in all the areas it operates in. As far as the biotech products are concerned, though the company may have the first mover advantage in the domestic market, there are lot of other companies which have similar products in their pipeline. For example, both Cipla and Ranbaxy are planning to introduce Erthyopoitein; Shanta Biotech is targeting to produce human insulin. Considering this, it is unlikely that the company would be able to maintain its pricing power.

    During the quarter, the company took over entire equity holding in Wockhardt Rhein Biopharm Ltd. (WRBL) WRBL was a joint venture company between Wockhardt Ltd. (WL) and Rhein Biotech GmbH, Germany, each holding 50% of the capital. WRBL is now a wholly owned subsidiary of Wockhardt.

    At the current market price of Rs 472, the stock is currently trading at 16x annualised earnings for 1HFY03.



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