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Unichem: Restructuring pays off - Views on News from Equitymaster
 
 
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  • Sep 21, 2001

    Unichem: Restructuring pays off

    The restructuring exercise initiated by Unichem Laboratories seems to be bearing fruit. The company's margins have shown steady improvement in the last two years due to high margin product introductions and increasing focus on exports. The company's domestic formulations business grew by a robust 22.8% last fiscal.

    (Rs m) 1QFY01 1QFY02 % change FY01
    Sales 647 672 3.8% 2,190
    Other Income 5 5 0.9% 27
    Expenditure 562 543 -3.3% 1,854
    Operating Profit (EBDIT) 85 128 51.3% 337
    Operating Profit Margin (%) 13.1% 19.1% 15.4%
    Interest (net) 15 15 -3.7% 50
    Depreciation 15 17 12.3% 59
    Profit before Tax 59 102 71.3% 254
    Tax 5 10 108.3% 22
    Extraordinary Item -1 -5 -34
    Profit after Tax/(Loss) 53 87 63.1% 199
    Net profit margin (%) 8.2% 12.9% 9.1%
    No. of Shares (eoy) (m) 8.5 8.5 8.5
    Diluted Earnings per share* 25.0 40.8 23.4
    P/E (at current price) 3.9 6.8
    *- annualised

    The company now plans to widen its therapeutic reach. Unichem's focus has been on the anti-infectives, enzymes and sedatives, cardiovascular, and central nervous system (CNS) therapeutic segments. Some of its top grossers include the pain treatment drug Ampoxin and digestive disorder medicines - Unienzyme -MPS and Vizylac. The company also has an animal healthcare division, which focuses on antibiotics, reproductive care products, feed supplements and growth promoters.

    Last year the company launched two new divisions - Foreva (catering exclusively to women healthcare) and Molecular Generics, which cater to the generics market. The growth drivers were tranquilisers and anti-rheumatics, which registered growth of 18% and 73.4% respectively. While tranquilisers contribute 11.4% to the total turnover, anti-rheumatics contribute around 8.5%. Cardiovascular and CNS also registered healthy growth rates. The growth in the cardiovascular segment was driven by Corvadil-A (hypotensive combinations) and Loprin (anticoagulents). Serta (antidepressant), with a growth rate of 92.9%, was the key growth driver for the CNS category. Cardiovascular and CNS together contribute around 10% to the total turnover.

    The company has been launching products in the high margin segments, which has helped it enhance its overall profitability margins. The company introduced eight products last fiscal. Some of the products introduced include Glitase a drug used to treat diabetes, TG-tor a cholesterol reducing drug, Roff-50 a painkiller, Erix Unichem's version of Pfizer's blockbuster drug Viagra and Nutreva a Protein supplement. It plans to introduce 10 products in the current year.

    The stock currently trades at Rs 160 discounting its 1QFY02 annualised earnings 4 times. Though the restructuring excerise initiated by the company has paid off, valuations going forward would depend on the success in various new therapeutic segments it plans to venture into.

     

     

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