Wockhardt: Swift growth - 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?  

Wockhardt: Swift growth

Oct 31, 2002

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)3QFY023QFY03Change9mHFY029mHFY03Change
Sales1,7242,05319.1% 4,715 5,643 19.7%
Other Income 19 3 -84.2% 31 9 -71.0%
Expenditure1,3551,60118.2% 3,795 4,481 18.1%
Operating Profit (EBDIT) 36945222.5%9201,16226.3%
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 4275.0% 51 109 113.7%
Profit after Tax/(Loss)29636021.6%69790630.0%
Net profit margin (%)17.2%17.5% 14.8%16.1% 
No. of Shares (m)36.336.3 36.336.3 
Diluted Earnings per share*32.639.7 38.449.9 
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

WOCKHARDT Announces Quarterly Results (3QFY20); Net Profit Up 125.0% (Quarterly Result Update)

Jan 28, 2020 | Updated on Jan 28, 2020

For the quarter ended December 2019, WOCKHARDT has posted a net profit of Rs 192 m (up 125.0% YoY). Sales on the other hand came in at Rs 9 bn (down 16.9% YoY). Read on for a complete analysis of WOCKHARDT's quarterly results.

WOCKHARDT Announces Quarterly Results (1QFY20); Net Profit Up 57.2% (Quarterly Result Update)

Aug 28, 2019 | Updated on Aug 28, 2019

For the quarter ended June 2019, WOCKHARDT has posted a net profit of Rs 369 m (up 57.2% YoY). Sales on the other hand came in at Rs 9 bn (down 14.3% YoY). Read on for a complete analysis of WOCKHARDT's quarterly results.

More Views on News

Most Popular

India: Recovery Stalled by Vaccine Games? (The Honest Truth)

Apr 13, 2021

Ajit Dayal on how India's vaccine strategy will impact the markets.

Top 3 Nifty ETFs to Buy Now (Fast Profits Daily)

Apr 20, 2021

In this video I tell you the three Nifty ETFs I think are the best.

A Stock with 700% Return Potential Comes with Additional Payoffs (Profit Hunter)

Apr 15, 2021

Narayana Murthy was one of the first unicorn founders to get the backing of this entity...

11x Bankruptcy to Bluechip Stock: A Rare India Revival Story (Profit Hunter)

Apr 16, 2021

There is no stopping this 11-bagger stock from significant upside.

Why Did the Market Crash on Monday? (Fast Profits Daily)

Apr 13, 2021

In this video, I'll you what I think is the real reason behind yesterday's market crash.


India's #1 Trader
Reveals His Secrets

Secret To Increasing Your Trading Profits Today
Get this Special Report,
The Secret to Increasing Your Trading Profits Today, Now!
We will never sell or rent your email id.
Please read our Terms


Apr 22, 2021 (Close)


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