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Wockhardt: Awaiting a trigger - Views on News from Equitymaster
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  • Sep 18, 2000

    Wockhardt: Awaiting a trigger

    Wockhardt’s stock price has seen a dip of over 10% over the past quarter despite the company successfully launching its biotech based Hepatitis–B vaccine, integrating Merind’s operations and having six pharmaceutical brands in the ORG Top–300. (Dexolac, the company’s medical nutrition brand was the new entrant to the ORG Top 300 in the first half.)

    Biovac–B, is reportedly giving a tough time to Engerix, SmithKline Pharma’s Hep–B vaccine having already sold a million doses (both paediatric and adult doses). Besides, the company has another biotech product erythoproetin (for the treatment of anaemia) slated for launch in the current year.

    Even in anti–infectives (which contributes almost 29% of the company’s turnover) Wockhardt has launched Floxur (a quinolone antibiotic) which is targeting a Rs 510 m market growing at over 40% per annum.

    Another promising business for the company is the infant nutrition business where its Dexolac brand registered a 33% growth in the first half.

    Business wise performance
    Business 1H June 2000 1H June 1999 Growth
    Pharma -Branded 1491 1325 13.0%
    Medical Nutrition 167 122 37.0%
    Pharma -Generics 102 177 -42.0%
    Bulk Drugs -Domestic 139 193 -28.0%
    Exports 527 436 21.0%
    Veterinary 209 100 110.0%
    Discontinued Products 0 118  
    Total 2636 2471* 7.0%
    *Includes Merind

    The key driver for Wockhardt stock from here on would be its success in the US generic market where it has filed seven patents already for NDDS already. The company already has a tie up with Sidmak Labs USA for distribution in place. It launched enalapril maleate (a cardiovascular formulation) tablets in the US generic market a month back, after the expiry of Merck’s patent.

    The company is among the highest spenders on R & D and spends anywhere between Rs 400 m to Rs 450 m on R & D every year, it amortises over a period of three years. It is also estimated to clock exports of a Rs 1 bn in the current year.

    We expect the company to report a net profit in the range of Rs 800 m (EPS: Rs 22.6) in the current year (the company accounting year ends in December) which implies an earnings multiple of less than 18 times.



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