Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Wockhardt: Swift growth - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Oct 31, 2002

    Wockhardt: Swift growth

    Wockhardt has posted another quarter of strong growth in revenues and improvement in operating margins. For 3QFY02, the company’s revenues were up 19%, while the bottomline grew by 22%.

    The growth in topline was much higher compared to the preceding quarter (2QFY03) in which the company clocked a 14% rise in topline. While Wockhardt’s domestic business grew by 17%, exports grew at a stellar rate of 56%. Following this strong growth in exports, contribution to total revenues increased to 30%. The improvement in operating margins came from reduction in inventory levels.

    (Rs m) 3QFY02 3QFY03 Change 9mHFY02 9mHFY03 Change
    Sales 1,724 2,053 19.1% 4,715 5,643 19.7%
    Other Income 19 3 -84.2% 31 9 -71.0%
    Expenditure 1,355 1,601 18.2% 3,795 4,481 18.1%
    Operating Profit (EBDIT) 369 452 22.5% 920 1,162 26.3%
    Operating Profit Margin (%) 21.4% 22.0%   19.5% 20.6%  
    Interest 38 18 -52.6% 116 56 -51.7%
    Depreciation 30 35 16.7% 87 100 14.9%
    Profit before Tax 320 402 25.6% 748 1,015 35.7%
    Tax 24 42 75.0% 51 109 113.7%
    Profit after Tax/(Loss) 296 360 21.6% 697 906 30.0%
    Net profit margin (%) 17.2% 17.5%   14.8% 16.1%  
    No. of Shares (m) 36.3 36.3   36.3 36.3  
    Diluted Earnings per share* 32.6 39.7   38.4 49.9  
    P/E (at current price)   11.2     8.9  

    Wockhardt’s export strategy is quite different from other domestic players. While most of its peers have chosen the ANDA (Abbreviated new drug application) route, the company is targeting to create giant manufacturing capacities in difficult to manufacture bulk drugs. As a result, of the total exports, 3 bulk drugs (analgesic bulk -DMP, anti-cold bulk active-DPP, and Vitamin B12) currently contribute about 65% of revenues and the rest is accounted by formulation export to unregulated markets. During the quarter, sales of bulk drugs (active pharmaceutical ingredients- APIs) rose by 25%, while growth in revenues from formulation was 70%.

    Wockhardt initiated the biotech products (bio-generics) business in the global arena. It’s first two biotech products i.e, Hepatitis B vaccine and Erythropoetin are market leaders in their respective segments. Going forward, bio-generic and generics exports to US are expected to push growth to the higher trajectory. Wockhardt is expecting one new product introduction every year from its biotech division. That said competition is likely to get stiffer in the domestic market. For example, both Cipla and Ranbaxy are planning to introduce Erthyopoitein. Shanta Biotech is targeting to produce human insulin. Considering this, it is unlikely that the company would be able to maintain its pricing power.

    Revenues from generic formulations saw a sharp decline. Obviously, the company has not yet managed to get its act together as far as this segment is concerned. However, the company is approaching this market in a rather cautious way and is evident from lack of investment in any marketing infrastructure abroad. It intends to grow through the partnership route with companies filing ANDA in the US and Europe. A strategy that is similar to that of Cipla’s. Considering Wockhardt’s insignificant presence in this segment and the inherently uncertain nature of the business, it is prudent not to build up any revenue stream at this point of time.

    At the current market price of Rs 445, the stock is trading at a P/E multiple of 9x 9mFY02 annualised earnings. The company’s growth strategy seems to be working well. The biotech division of the company is capable of giving positive surprises, especially the human insulin strategy. However, the export basket is too concentrated and skewed towards older generation bulk drugs. Though the generic business of the company is likely to reduce concentration, this business would take time to take off.



    Equitymaster requests your view! Post a comment on "Wockhardt: Swift growth". Click here!


    More Views on News

    Sun Pharma: Bottomline Slips into the Red Amidst Challenging Environment (Quarterly Results Update - Detailed)

    Aug 14, 2017

    A challenging environment and one-time expense pushes Sun Pharma into a loss in the first quarter.

    Lupin: Bigger Challenges or Bigger Margin of Safety? (Quarterly Results Update - Detailed)

    Aug 14, 2017

    GST impact coupled with price erosion in US leads to lower profits for the quarter.

    Dr Reddy's: US Pressure Continues to Haunt (Quarterly Results Update - Detailed)

    Aug 8, 2017

    Profits plunge due to higher raw material costs.

    Biocon: Lower Licensing Income Leads to Muted Growth for the Quarter (Quarterly Results Update - Detailed)

    Jun 23, 2017

    Net Profit lower due to exceptional items in the previous year.

    Sun Pharma: Price Erosion in US Impacts Growth (Quarterly Results Update - Detailed)

    May 30, 2017

    US markets decline while other geographies grow in the quarter.

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    Proxy Plays: A Smart Way to Bet on 'Off Limits' Companies(The 5 Minute Wrapup)

    Aug 4, 2017

    The small-cap space is full of small players that are clear proxies to great growth stories and Indian megatrends.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    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: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms


    Aug 16, 2017 (Close)


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



    Detailed Financial Information With Charts