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A strong dose from E. Merck

Oct 19, 2000

E. Merck has reported impressive results for the third quarter ended September 2000 with a net profit growth of 62.75% to Rs 118.36 m (from a level of Rs 72.72 m in the second quarter). This is on the back of a 16.48% rise in the net sales to Rs 744.30 m. Interest expenditure has gone down almost 76% to Rs 3.73 m. The growth in sales is was primarily due to an upward price revision in its vitamin brand Neurobion in June 2000. The growth in net profit is partially due to the fact that the company had written off VRS expenditure last year. This was paid to the workers 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 entire long term debt has been repaid now.

The company is a 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.

The stock quotes at Rs 325 which implies an earnings multiple of 11.5 times of FY2001 annualised estimates.


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