Novartis: Restructuring benefits visible - Views on News from Equitymaster

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

  • MyStocks


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

Novartis: Restructuring benefits visible

Oct 31, 2001

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% change1HFY011HFY02% 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)31.931.7 31.931.9 
Diluted Earnings per share*17.327.2 13.817.8 
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 sales2QFY012QFY02
Raw Materials4.9%4.2%
Staff Costs6.7%7.3%
Purchase of finished goods48.8%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
1HFY02Sales (Rs.m)Growth %Margins %*
Pharma 19702.7%22.8%
Consumer Health19924.4%4.5%
Animal Healthcare Business18640.9%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.

Equitymaster requests your view! Post a comment on "Novartis: Restructuring benefits visible". Click here!


More Views on News

5 Stocks to Watch Out for Amid the Omicron Outbreak (Views On News)

Dec 3, 2021

As the new variant of Covid-19 emerges, keep an eye on these stocks.

This Stock Just Made a Historical Debut on the Exchanges (Views On News)

Nov 15, 2021

Shares of the company listed at premium of 253% from its IPO price, the highest ever.

3 Indian Pharma Companies that are Investing Big Time for the Future (Views On News)

Nov 9, 2021

In 2021, R&D of pharma companies roared to life in a never-before-seen way.

Demerger of Financial & Pharma Businesses puts Piramal Enterprises in Limelight (Views On News)

Oct 8, 2021

The company's shareholders will be issued 4 shares in the demerged entity for every 1 held in Piramal Enterprises.

Block Deal Disappoints Max Healthcare Shareholders. Stock Falls 6% (Views On News)

Sep 30, 2021

The divestment of 6.6% stake by the promoter is considered to be one of the largest block deals of the market.

More Views on News

Most Popular

Infosys vs TCS: Which is Better? (Views On News)

Nov 26, 2021

In the post pandemic era, the top two IT companies in India are fighting to capture the growing demand for IT.

This Multibagger Stock Zooms 20% After Dolly Khanna Buys Stake (Views On News)

Nov 24, 2021

Shares of this edible oil company zoomed over 50% in three days after ace investor bought around 1% stake.

6 Popular Stocks that Turned into Penny Stocks (Views On News)

Nov 27, 2021

A look at popular stocks that crashed big time and never recovered, i.e. which went from 'Multibaggers to Multibeggers'.

MobiKwik IPO Opens for Subscription Soon. Key Things to Know Before Subscribing. (Views On News)

Nov 20, 2021

The Rs 19 bn issue is set to hit the market soon.

5 Indian Companies Embracing Blockchain Technology (Views On News)

Nov 23, 2021

Blockchain adoption in India was slow in the past. Now, the technology is being well received.


Become A Smarter Investor
In Just 5 Minutes

Multibagger Stock Guide 2022
Get our special report Multibagger Stocks Guide (2022 Edition) Now!
We will never sell or rent your email id.
Please read our Terms


Dec 3, 2021 (Close)


  • Track your investment in NOVARTIS with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
  • Add To MyStocks