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E. Merck: The vitamin king consolidates

Sep 30, 2000

E. Merck is the market leader in vitamins and derives over 60% of its turnover from this segment. Three of its vitamin brands Evion, Neurobion and Polybion contribute almost 45% of the company’s turnover. All three however are under price control and are likely to remain that way for some time to come. Over the last couple of years the company has made a mark in non–vitamin areas such as cardiology, topical anti–inflammatory and dermatologicals. During the last year it introduced Emadine and Emadine AT for controlling hypertension, Maxepa, a nutrition related cardiac drug, Cadvion for vascular metabolic function, Exflam gel an anti–inflammatory cream, Candistat capsules, a modern antibacterial, Harpoon tablets, a quinoline antibiotic, and Evion skin cream.

These products are likely to lead the company’s profitability in the future though the vitamin segment remains a major contributory factor to the turnover. E. Merck’s parent had also planned a tie–up with Seven Seas, which would have given the company another valuable OTC (over the counter) brand. However, this tie–up did not materialise.

Besides, E. Merck also has a non–pharma division comprising reagents, kits, pigments and paper rolls which accounts for almost 10% of its turnover. This has also witnessed new product introductions in the last two years. Manufacturing and marketing of vitamin/mineral premixes for food industry, addition of products for filtration, electronic balances, water purification systems, testing equipment for food and gas industry and substantial expansion of product range of laboratory reagents are some of the new introductions in the non-pharma division.

E Merck has been improving its financials, doubling its post tax profits in the first half of the current year. This was primarily due to an upward price revision in its vitamin brand Neurobion in June 2000. A part of the reason for this growth is that the company had written off VRS expenditure paid to the workers last year when it closed its chemical unit located at Taloja. (The write off of this had depressed the earnings last year.) Besides, the company also repaid a part of its borrowings last year and the reduction in interest cost has also contributed to the surge in the bottomline.

The stock quotes at Rs 349 which implies an earnings multiple of 16.6 times of FY01 estimates.


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