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Aventis Pharma: Going strong

Aug 8, 2003

MNC pharma major, Aventis Pharma (formerly Hoechst Marion) has announced its June quarter results recently. The company recorded a 9% increase in the topline and a strong 37% growth in the bottomline. For the first half of FY04 (1HFY04) Aventis registered a 7% increase in revenues and net profits surged by 52%. In this context, let us briefly evaluate the performance of the company.

(Rs m) 2QFY03 2QFY04 % Change 1HFY03 1HFY04 % Change
Net Sales 1,603 1,753 9.4% 2,981 3,200 7.3%
Other Income 17 40 135.3% 42 68 61.9%
Expenditure 1,343 1,402 4.4% 2,539 2,627 3.5%
Operating Profit (EBDIT) 260 351 35.0% 442 573 29.6%
Operating Profit Margin (%) 16.2% 20.0%   14.8% 17.9%
Interest 1 - -100.0% 3 - -
Depreciation 37 40 8.1% 75 80 6.7%
Profit before Tax 239 351 46.9% 406 561 38.2%
Extraordinary Items 18 (5) - 1 60 -
Tax 87 113 29.9% 130 199 53.1%
Profit after Tax/(Loss) 170 233 37.1% 277 422 52.3%
Net profit margin (%) 10.6% 13.3%   9.3% 13.2%  
No. of Shares (eoy) (m) 23.0 23.0   23.0 23.0  
Diluted Earnings per share* 29.5 40.5   24.1 36.6  
P/E (at current price) 10.6     11.7  
* annualised            

If we exclude extraordinary item, bottomline growth in the June quarter surges to 57% YoY. If we do the same for the half yearly result, bottomline growth stands at over 31%. This indicates that the June quarter has operationally been much better than the company’s March quarter.

For 2QFY04, Aventis has recorded a steady growth in the topline. While the domestic revenues grew by 8.5%, exports registered a 12% rise. The company’s strategic brands grew by a strong 17%. Aventis’s strong brand equity and secondary demand for its brands like Cardace (27% rise), Targocid (24%), Clexane (23%), Amaryl (20%) & Allegra (17%) were the key reasons for this strong growth. However, the revenues from ‘Tavanic’ have seen a steady decline (26% drop). Consequently, the company has gradually reduced its investments in this brand. Among other brands, Combiflam (27%), Rabipur (20%), and Trental (36%) continued to maintain leadership position in their respective segments. While, Avil and Daonil registered single-digit growths, Soframycin recorded negative growth, but remained leader in its category.

A favourable domestic product mix coupled with an increase in the contribution from exports has helped Aventis improve its operating margins. Improvement in operating efficiencies and a sharp increase in the other income has helped Aventis record an increase in the net margins.

In July ’03, Aventis has launched Lantus, an insulin glargine used for the treatment of diabetes. The product has been already launched in Germany and USA. The company is in the process of obtaining regulatory clearance for launching this product in India. Actonel, a product for osteoporosis, has also been successfully introduced in many countries and the company is likely to take a decision on its launch in India soon. The launch of these products could benefit from APL’s brand name and franchise network. This could further improve the performance of the company.

At Rs 429 the Aventis stock trades at a P/E of 11.7x its annualised 1HFY04 earnings. Historically, the stock has traded at a discount to its MNC peers owing to some Indian promoter related issues. Considering the relatively new product portfolio, high exposure in the lifestyle segments and strong parent product pipeline, the long-term prospects of the company seem bright.

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