Nicholas Piramal (NPIL) announced its 1HFY04 results recently. While the company reported a 21% increase in topline, bottomline grew by 27%. For 2QFY04, the company recorded a 22% and 82% growth in net sales and net profits respectively. However, it is to be noted here that as the figures of 2QFY04 include the results of the erstwhile Global Bulk Drugs and Fine Chemicals, which was merged with the company w.e.f. 1st January ’03. In this context, let us evaluate the company’s performance.
Results at a glance…
Operating Profit (EBDIT)
Operating Profit Margin (%)
Profit before Tax
Extraordinary income (expense)
Profit after Tax/(Loss)
Net profit margin (%)
No. of Shares (m)
Earnings per share (Rs)*
An analysis of NPIL’s topline growth reveals that while domestic sales grew by 14%, exports grew by a strong 194%. However, if we exclude the bulk drugs sales (i.e., sales of Global Bulk Drugs and Fine Chemicals), we observe that for 1HFY04, domestic sales grew by 13% and exports grew by 12%.
Vitamins & Fine Chemicals
Diagnostics & Patient Care
Vitamins & Fine Chemicals
Grand Total ((A)+(B))
In the domestic market, NPIL managed to outperform the industry in the formulations business with a 13% growth during 1HFY04. The industry grew by a mere 4.4% during the same period. The top ten brands of the company (36% of portfolio) grew by a strong 16%. While new products made up for 8.2% of domestic formulation sales, contribution from the lifestyle segment grew to 32.2% of domestic formulation sales (up from 29.7% in 1HFY03). A therapeutic segment wise break up of domestic formulations sales reveals that the lifestyle segments of anti-diabetics and CVS were the key growth drivers. However, anti-infectives and gastro segments reported negative growth.
Domestic formulations break-up
In the vitamins and fine chemicals business division, although growth suffered during 2QFY04, for 1HFY04, NPIL recorded a 12% growth. The growth was primarily driven by the inclusion of Vitamin C and E into the product portfolio of the company. In the Diagnostics & Patient Care division, the new product launches were the key growth drivers, contributing 17% of the division’s sales. Another encouraging aspect is that 60% of the company’s portfolio is the lifestyle segment. NPIL plans to make product launches in the diabetes and osteoporosis segments.
On the exports front, NPIL is pursuing the strategy of entering into manufacturing partnerships with innovator company for both formulations and bulk drugs. Although branded formulations sales recorded a 32% growth, the gains were pared by the poor showing in the Vitamins and Fine Chemicals segment. During the period under review, the company filed two new drug master files (DMFs). On the R&D front, NPIL is in the process of setting up a 0.2 m square feet facility at Goregaon. The company plans to make a capex on R&D of Rs 800 m over the next two years.
NPIL has seen a decline in the other income due to lower dividend from its subsidiaries and joint ventures. However, despite the drop in other income and a rise in extra-ordinary expenditure (comprising of VRS and separation cost), strong topline growth and a sharp drop in interest expenses has helped the company improve its net margins.
For 2HFY04, NPIL has projected a sales growth of 18-20% with exports crossing Rs 1 bn for the year. The company has also stated that it plans to maintain the dividend payout over 30% for FY04. At Rs 461, NPIL is trading at a P/E of 12x its 1HFY04 annualised earnings. Acquisitions have been the key growth driver for the company in the recent past. As NPIL derives most of its revenues from the domestic market, the implementation of product patent is likely to affect its performance. Even in the export market, which is NPIL’s new thrust area, being a late entrant it could face intense competition.
LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.
SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.
Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India. Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: firstname.lastname@example.org. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407