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Novartis: Restructuring benefits visible - Views on News from Equitymaster
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  • Oct 31, 2001

    Novartis: Restructuring benefits visible

    Novartis India has announced a 6.8% growth in sales and 38% growth in PBT for 1HFY02. Subsequent to completion of the demerger of its agribusiness and amalgamation of Ciba CKD Biochem, the company has recast prior period results. The results are thus comparable on a year to year basis.

    (Rs m) 2QFY01* 2QFY02 % change 1HFY01 1HFY02 % Change
    Sales 1,186 1,233 3.9% 2,204 2,355 6.8%
    Other Income 76 61 -18.9% 130 108 -17.0%
    Expenditure 1,009 925 -8.3% 1,905 1,943 2.0%
    Operating Profit (EBDIT) 177 308 73.9% 299 412 37.8%
    Operating Profit Margin (%) 14.9% 25.0%   13.6% 17.5%  
    Interest 29 4 -85.2% 63 29 -53.8%
    Depreciation 22 20 -9.6% 43 41 -4.2%
    Profit before Tax 202 345 71.1% 323 450 39.1%
    Extraordinary Income - -   - -  
    Tax 64 130 102.3% 103 165 60.8%
    Profit after Tax/(Loss) 138 216 56.6% 221 285 29.0%
    Net profit margin (%) 11.6% 17.5%   10.0% 12.1%  
    No. of Shares (eoy) (m) 31.9 31.7   31.9 31.9  
    Diluted Earnings per share* 17.3 27.2   13.8 17.8  
    P/E (at current price) 7.4   11.3  

    Though the topline figures were more or less in line with the growth in domestic pharma market, a spurt of more than 1000 basis points spurt in operating margins in 2QFY02, comes as a pleasant surprise. The improvement in operating margins was on the back of new product introductions, a sharp drop in purchase price of pharma products, and closure of its loss making ciba vision business. Though the company's top brand Voveran (an anti-inflammatory) witnessed a degrowth, sales were up due to four new products recently launched by the company.

    % of sales 2QFY01 2QFY02
    Raw Materials 4.9% 4.2%
    Staff Costs 6.7% 7.3%
    Purchase of finished goods 48.8% 40.6%

    The company has also disclosed it segmental information for 1HFY02 as shown in the table below. Though on a smaller base, both consumer healthcare and animal healthcare business have grown at healthy rates. However, high marketing & sales expenses and stiff competition has impacted margins in consumer healthcare division.

    Table Showing Segmentwise operating margins
    1HFY02 Sales (Rs.m) Growth % Margins %*
    Pharma 1970 2.7% 22.8%
    Consumer Health 199 24.4% 4.5%
    Animal Healthcare Business 186 40.9% 16.4%
    * Profit before interest and tax

    At the current market price of Rs 202, the stock trades at 12 x its annualised earnings for 1HFY02. The results of the restructuring excerise undertaken by the company is evident in current results. It seems that though would be able to maintain its margins going forward, due to its presence in niche speciality segments the topline is clearly dependent on new product introductions. However, the parent company seems uncomfortable launching new products until patent protection becomes a reality in India.



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    Aug 18, 2017 (Close)


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