X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Hoechst: Is restructuring paying? - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Sep 3, 2001

    Hoechst: Is restructuring paying?

    Hoechst Marion Roussel (HMR) went through a major restructuring exercise in the last three years. The company aggressively rationalized its product portfolio replacing older products and reducing its DPCO exposure. The DPCO exposure of the company, which was around 60% a couple of years back, is now down to 40%. Quick launch of new products helped in increasing new product contribution to the total domestic formulations sales to 16% (up from 6% couple of years back). Post restructuring, the company’s product portfolio is a unique combination of old, mature brands as well as new product launches, which have met with remarkable success as shown in the table below. The strategy for the company going forward is to concentrate on these strategic brands to ensure growth.

    Products QoQ* Market Share
    Growth (%) (%)
    Cardace 96 17.3
    Clexane 46 25.1
    Allegra 61 8.8
    Amaryl 66 3.8
    Insuman 25 4.9
    Targocid 32 20.9
    (*Jan- March'Q1 01-02 over 00-01)

    Further, rationalization of expenses, particularly a drastic reduction in staff costs helped in improving operating margins. Moreover, as part of restructuring, HMR is shifting its operations to low cost manufacturing facilities. The recent sale of the company’s Mulund facility is expected to generate considerable cash flows for the company. The company has already reduced its debt by Rs 225 m in the last year (almost 50% of total debt). With additional cash flows from sale of this property, the debt burden is expected to reduce significantly in the current year. The company’s new facility at Goa has already been inspected by German FDA. It is expected that HMR's facilities would be used as a global source supply for its parent company. (Particularly for an intermediate of articaine hydrochloride and a key intermediate for ramipril).

    However, the sales figures for the first six months of HMR were a bit disappointing. While the company had reported a growth of 10.8% in the first quarter (January to March) of the current year, for six months ended June'01 sales grew merely by 2%.

    The volatility in sales is due to the fact that the growth in volumes has been negative in the three months period, March-May’01. The older brands of the company, being in the traditional segments are trapped in the overall slow growth of the industry. Though it is a bit early to conclude, it seems that new products sales growth is also showing signs of stagnating at higher base.

    Further, the price growth of the company remained flat in the corresponding three-month period (March-May’01). Though the company has been able to command premium price for its strategic products till date, it may be facing price competition from domestic players, which remains a cause for concern. The company needs to maintain a flow of new product launches to sustain growth momentum.

    Aventis Pharma (which holds 50.1% stake) has an enviably rich pipeline of products and the Indian company is expected to benefit from that in the coming years. At this point of time, it seems that the parent company would continue to give fast access to its worldwide product portfolio. Further, HMR has 49% stake in RPR India (balance being held by Aventis Pharma), which has a strong portfolio in cardiovascular and oncology segments. This would help in creating a niche in these high growth segments.

    At the current market price of Rs 403, HMR trades at 21 times its FY2002E earnings, which is lower to its peers in the industry. The reason for the same seems to be successive disappointments due to non-relaxation of DPCO in favour of the company and the recent drop in sales growth. To summarize, the fact remains that the company’s product portfolio boasts of some impressive brands. Hence, DPCO dilution in the company’s favour remains one of the triggers for the stock price. Further, though the company is moving in the right direction, it needs to be seen how well the company maintains its growth momentum in future.

     

     

    Equitymaster requests your view! Post a comment on "Hoechst: Is restructuring paying?". Click here!

      
     

    More Views on News

    Sun Pharma: Bottomline Slips into the Red Amidst Challenging Environment (Quarterly Results Update - Detailed)

    Aug 14, 2017

    A challenging environment and one-time expense pushes Sun Pharma into a loss in the first quarter.

    Lupin: Bigger Challenges or Bigger Margin of Safety? (Quarterly Results Update - Detailed)

    Aug 14, 2017

    GST impact coupled with price erosion in US leads to lower profits for the quarter.

    Dr Reddy's: US Pressure Continues to Haunt (Quarterly Results Update - Detailed)

    Aug 8, 2017

    Profits plunge due to higher raw material costs.

    Biocon: Lower Licensing Income Leads to Muted Growth for the Quarter (Quarterly Results Update - Detailed)

    Jun 23, 2017

    Net Profit lower due to exceptional items in the previous year.

    Sun Pharma: Price Erosion in US Impacts Growth (Quarterly Results Update - Detailed)

    May 30, 2017

    US markets decline while other geographies grow in the quarter.

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    More
    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
     

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    SANOFI INDIA SHARE PRICE


    Aug 18, 2017 (Close)

    TRACK SANOFI INDIA

    • Track your investment in SANOFI INDIA with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
    • Add To MyStocks

    SANOFI INDIA 8-QTR ANALYSIS

    Detailed Quarterly Results With Charts

    COMPARE SANOFI INDIA WITH

    MARKET STATS