X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2019 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.
Pfizer: On the course - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Pfizer: On the course

Sep 27, 2004

Performance summary
Pfizer India has declared its 3QFY05 results (November year ending). The net profit of the company has grown by 15 % in the August quarter, although this has to be viewed in the context of a lacklustre performance last year. The operating margins have improved by 110 basis points to 12.7% compared to 11.6% in the same quarter last year. The net profit margin has also improved by 150 basis points to 10.6%. The operating margin for 9mFY05 was also better, with an improvement of 420 basis points to 12.2%.

(Rs m) 3QFY04 3QFY05 Change 9mFY04 9mFY05 Change
Net sales 1,349 1,342 -0.5% 3,432 3,909 13.9%
Other income 90 86 -4.9% 283 268 -5.2%
Expenditure 1,193 1,172 -1.7% 3,159 3,433 8.7%
Operating profit (EBDITA) 156 170 9.0% 273 476 74.3%
Operating profit margin (%) 11.6% 12.7%   8.0% 12.2%  
Interest 1 - -100.0% 4 1 -83.3%
Depreciation 20 23 16.3% 70 66 -5.6%
Profit before tax 226 233 3.2% 482 678 40.4%
Extraordinary items 38 22 -43.1% 113 123 8.2%
Tax 65 70 7.5% 155 197 27.2%
Profit after tax/(loss) 123 142 15.1% 214 358 67.1%
Net profit margin (%) 9.1% 10.6%   6.2% 9.2%  
No. of shares (m)       28.8 28.8  
Diluted earnings per share (Rs)*       9.9 16.6  
P/E ratio (x)         32.3  
(* annualised)            

Whatís the companyís business?
Pfizer India is a 40% subsidiary of the world's largest pharmaceuticals company - Pfizer Inc. It has some strong brands in its portfolio like Corex (a cough syrup) and Becosules (a B-complex supplement), both being more than Rs 1 bn brands each. The company has merged Parke Davis and Pharmacia with itself. Pfizer derives most of its revenues from the pharmaceuticals division (86%). The company also has presence in the animal health (10%) and clinical development operations (4%) segments. In the pharma segment, merger with Parke-Davis and strong brands like Benadryl, Corex and Gelusil are the key drivers. In the animal health segment, Pfizer plans to capitalize on its parent's global leader status and become a major player. The company is also evaluating the inorganic growth strategy in this segment. Pfizer also carries out clinical trials on behalf of its parent.

What has driven performance in 3QFY05?
The restructuring exercise initiated by the company in last two years seems to have started benefiting the company, which can be seen from the improved margins over the last two quarters.

Sales:  The sales of the company remained almost stagnant in the August quarter. But this should be viewed in context that there was pent up demand in the same quarter last year after the truckers' strike and VAT fiasco. Looking at segmental performance, the growth of the companyís revenue has been propelled by the pharmaceutical business which recorded a growth of 13% in the first nine months of this fiscal while the clinical development business saw a de-growth of 13%. The animal health division of the company grew by 10% in the same period.

Segment Revenue: 9mFY04 9mFY05 Change Sales in FY04
(%)
Sales in FY05
(%)
Pharmaceuticals (Incl. Services) 3130 3530 12.8% 85.9% 86.8%
Animal Health (Incl. Services) 390 427 9.6% 10.7% 10.5%
Services - Clinical
Development Operations
125 109 -13.2% 3.4% 2.7%
Total 3645 4066 11.5%    

Restructuring bearing fruit:  Pfizer has benefited on the operational front, led by lower staff cost and other manufacturing expenses. There has been a little improvement in its operating profit on account of fall in other manufacturing expenses and lower proportion of traded goods in the companyís sales. We believe, the operating performance will improve further, as the benefits of restructuring continue to filter in. The streamlining of the operations has also decreased the depreciation charge for the company in the first nine months. In another restructuring exercise, Pfizer has sold its unit at Ankaleshwar, and a profit of Rs 29 m has been booked in the quarter. This has pruned the extraordinary expenses, which arise due to writing-off the VRS related expenses that the company incurred in 2001. The restructuring also involved the discontinuance of relatively non-profitable brands over a period of two years.

Cost Structure 9mFY04 9mFY05 Change % of Sales in FY04 % of Sales in FY05
Consumption of Materials
(Includes Increase/Decrease
in stock in trade)
741 1007 35.9% 21.6% 25.8%
Purchase of Finished Goods 608 543 -10.7% 17.7% 13.9%
Staff Cost 573 615 7.3% 16.7% 15.7%
Other Expenditure 1237 1268 2.5% 36.0% 32.4%
Total 3159 3433 8.7% 92.0% 87.8%

Over the last four quarters
There has been a consistency in Pfizer's performance over the last five quarters. While there was a spurt in sales growth in the first quarter of the of FY05 (low base effect), the overall performance of in last four quarters is commendable considering the fact that the products of the company are mostly old and competition is higher.

What to expect?
At Rs 535, the stock is trading at 32x itís annualised 9mFY05 earnings. Though valuations look on the higher side, one must remember that Pfizer is in a phase where growth in profits will be faster than its sales growth since the full benefits of the restructuring are yet to come. Apart from this, the new patent regime from the January 2005 will bring in benefits for the company in form of new product launches. We believe that the company is set to aggressively explore this market opportunity, which is likely to contribute to a higher growth in the future.


Equitymaster requests your view! Post a comment on "Pfizer: On the course". Click here!

  

More Views on News

PFIZER Announces Quarterly Results (3QFY19); Net Profit Up 51.2% (Quarterly Result Update)

Jan 25, 2019 | Updated on Jan 25, 2019

For the quarter ended December 2018, PFIZER has posted a net profit of Rs 1 bn (up 51.2% YoY). Sales on the other hand came in at Rs 5 bn (up 12.5% YoY). Read on for a complete analysis of PFIZER's quarterly results.

PFIZER 2017-18 Annual Report Analysis (Annual Result Update)

Jan 1, 2019 | Updated on Jan 1, 2019

Here's an analysis of the annual report of PFIZER for 2017-18. It includes a full income statement, balance sheet and cash flow analysis of PFIZER. Also includes updates on the valuation of PFIZER.

PFIZER Announces Quarterly Results (2QFY19); Net Profit Down 13.8% (Quarterly Result Update)

Nov 15, 2018 | Updated on Nov 15, 2018

For the quarter ended September 2018, PFIZER has posted a net profit of Rs 958 m (down 13.8% YoY). Sales on the other hand came in at Rs 5 bn (down 9.0% YoY). Read on for a complete analysis of PFIZER's quarterly results.

Aster DM Healthcare (IPO)

Feb 10, 2018

Should you subscribe to the IPO of Aster DM Healthcare Ltd?

Shalby Ltd. (IPO)

Dec 2, 2017

Should you subscribe to the IPO of Shalby Ltd?

More Views on News

Most Popular

This is Why the Stock of Jubilant FoodWorks Went Up 1,160%(The 5 Minute Wrapup)

Apr 12, 2019

This critical business strategy has enabled companies to scale their operations faster.

Pocketing Massive Gains with HDFC And HDFC Bank(Profit Hunter)

Apr 12, 2019

Here's how one could have generated gains of Rs 59,250 in 10 days by trading HDFC and HDFC Bank with a capital of Rs 4 lakh.

My Master Series on How to Trade Election 2019(Profit Hunter)

Apr 16, 2019

For 30 years he has watched how elections impact the markets, and practiced how to profit from it. Now he is here...telling you everything. Read on...

Election Series: Follow the World's Biggest Traders To See Where the Money Flows(The 5 Minute Wrapup)

Apr 17, 2019

20% of all the traders bring in 80% of the money. Watch these 20% and you get a working idea of which way the wind is blowing.

A Letter to You from India's No. 1 Trader(The 5 Minute Wrapup)

Apr 15, 2019

It's our great pleasure to introduce Vijay Bhambwani to our readers - we consider Vijay to be India's best trader. Read on to find out why...

More

Get the Indian Stock Market's
Most Profitable Ideas

How To Beat Sensex Guide 2019
Get our special report, How to Beat Sensex Nearly 3X Now!
We will never sell or rent your email id.
Please read our Terms

PFIZER SHARE PRICE


Apr 25, 2019 (Close)

TRACK PFIZER

COMPARE PFIZER WITH

MARKET STATS