Orchid Chemicals & Pharmaceuticals (OCP) is mainly into the manufacture of bulk drugs, formulations and nutraceuticals. The company is the largest manufacturer and exporter of cephalosporin bulk drugs in India and is amongst the top five producers in the world. OCP recently announced its September quarter results. The company has emerged as a preferred choice for Cephalosporin bulk drug, and is reaping the benefits of the same. The company reported a 45% growth in topline and a robust 153% bottomline growth during the quarter.
Results at a glance ...
Operating Profit (EBDIT)
Operating Profit Margin (%)
Profit before Tax
Profit after Tax/(Loss)
Net profit margin (%)
No. of Shares (m)
Diluted Earnings per share (Rs)*
During 2QFY04, OCP's bulk drug business (namely cephalosporin) contributed 83% (as against 88% in 2QFY03) to the total gross revenues with the formulations business making up for the rest. Buoyed by introduction of new products and exports, the company's cephalosporin business recorded an impressive 35% growth during 2QFY04 (Rs 1,391 m). Although the formulations business also recorded an impressive 93% growth on the back of strong sales in the Russian and Latin American markets, OCP registered operating losses from this business during the quarter under review.
Revenue mix by segment
Segment Results (Profit before tax and interest)
On the operations front, OCP registered a 420 basis point improvement in operating profit margins. Although raw material and staff cost as a percentage of net sales increased by 2.2 percentage points and 0.6 percentage points respectively, a sharp drop in other expenditure from 30.2% of net sales in 2QFY03 to 23.2% in 2QFY04 helped the company improve its operating efficiencies. An improvement in operating margins coupled with a less than proportionate rise in interest cost and depreciation provision has helped the company register a sharp 152% growth net profit.
At Rs 262, OCP is trading at a P/E of 29x annualised 1HFY04 earnings. Given the relatively smaller size and bulk drugs focus on the company, the valuations seem to be stretched. This apart, almost 83% of OCP's September quarter gross revenues were from its cephalosporin bulk drugs business. However, given the company's US-FDA approved plant and joint venture in China, OCP is well placed to capitalize on the contract manufacturing opportunities that may come its way.
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: email@example.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407