X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2019 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.
Merck India: Restructuring drives growth - Views on News from Equitymaster

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

  • MyStocks

MEMBER'S LOGINX

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

Merck India: Restructuring drives growth

Dec 30, 2003

Merck India is a 51% subsidiary of Merck KgaA, Germany. The company derives almost 60% of its revenues from its pharmaceutical business and the balance from chemicals. The company’s pharmaceutical business comprises mainly of vitamins, cardio-vascular drugs, and cough and cold preparation. The chemical business on the other hand, comprises of analytics, reagents, scientific laboratory products and pigments. In the pharma business, delay in the implementation of liberalised pricing legislation and reduction in the prices of certain drugs (like Neurobion Forte tablets) by the government resulted in the company registering stagnant growth in pharma sales in FY03. In the chemicals business, during FY03, while the analytics and reagents division and pigments division grew by 17% and 52% respectively, scientific laboratory products division registered a 29% drop. The performance of the scientific laboratory products division was affected due to competition from Europe and China. Resultantly, the company, as a whole, had reported a marginal 2% growth in net sales and an 11% drop in net profits during FY03.

Results at a glance...
(Rs m) 3QFY03 3QFY04 Change 9mFY03 9mFY04 Change
Net Sales 894 979 9.5% 2,644 2,712 2.6%
Other Income 18 39 119.1% 54 80 48.9%
Expenditure 722 728 0.7% 2,191 2,128 -2.9%
Operating Profit (EBDIT) 171 251 46.5% 453 584 29.0%
Operating Profit Margin (%) 19.2% 25.6%   17.1% 21.5%  
Interest 1 1 -11.0% 2 8 242.5%
Depreciation 25 22 -10.6% 73 70 -3.5%
Profit before Tax 163 267 63.5% 431 586 35.9%
Tax 55 94 71.6% 138 205 48.2%
Profit after Tax/(Loss) 108 173 59.4% 293 381 30.0%
Net profit margin (%) 12.1% 17.7%   11.1% 14.0%  
No. of Shares 17 17   17 17  
Diluted Earnings per share* 25.7 41.0   23.2 30.1  
P/E Ratio   10.7     14.6  
(* annualised)            

The stagnancy in topline growth continued during 9mFY04 with Merck India reporting a meager 3% growth. The topline growth was due to a 5% growth in the chemicals segment. The pharma business, however, registered a marginal 1% growth. On the operations front, various cost cutting measures undertaken by the company has helped it record an impressive 440 basis point improvement in operating profit margins. The company has discontinued manufacturing activities at its Taloja factory, which has helped bring down costs considerably. This apart, in 2003, 281 employees have opted for Merck’s voluntary retirement scheme, resulting in a drop in the staff cost. However, the raw material cost saw a sharp increase due to an additional charge made by the company for writing down the value of its inventory.

Expenditure as a percentage of net sales...
(Rs m) 3QFY03 3QFY04 9mFY03 9mFY04
Raw material 22.9% 27.8% 22.7% 30.3%
Purchase of traded goods 26.3% 19.9% 25.7% 18.9%
Staff cost 11.9% 9.4% 14.2% 11.9%
Other expenditure 19.7% 17.3% 20.2% 17.4%

An improvement in operating profits coupled with an increase in other income has helped the company register an impressive 30% growth in bottomline.

At Rs 440, Merck India is trading at a P/E multiple of 15x its 9mFY04 earnings. Competition from generics and small-scale manufacturers is eating into the company’s market share in the pharma and laboratory reagents division. Meanwhile, competition form China continues to adversely affect the company’s performance in the pigments division. This apart, the general performance of the pharma sector is also being affected by the delay in the implementation of DPCO 2002. To this extent, investors need to exercise caution while investing in this stock.


Equitymaster requests your view! Post a comment on "Merck India: Restructuring drives growth". Click here!

  

More Views on News

MERCK LTD Announces Quarterly Results (2QFY19); Net Profit Up 29.8% (Quarterly Result Update)

Nov 5, 2018 | Updated on Nov 5, 2018

For the quarter ended September 2018, MERCK LTD has posted a net profit of Rs 411 m (up 29.8% YoY). Sales on the other hand came in at Rs 2 bn (down 27.7% YoY). Read on for a complete analysis of MERCK LTD's quarterly results.

MERCK LTD Announces Quarterly Results (1QFY19); Net Profit Up 63.1% (Quarterly Result Update)

Aug 8, 2018 | Updated on Aug 8, 2018

For the quarter ended June 2018, MERCK LTD has posted a net profit of Rs 328 m (up 63.1% YoY). Sales on the other hand came in at Rs 2 bn (down 17.1% YoY). Read on for a complete analysis of MERCK LTD's quarterly results.

Aster DM Healthcare (IPO)

Feb 10, 2018

Should you subscribe to the IPO of Aster DM Healthcare Ltd?

Shalby Ltd. (IPO)

Dec 2, 2017

Should you subscribe to the IPO of Shalby Ltd?

The Power of 5 Minutes (The 5 Minute Wrapup)

Jun 16, 2017

Here's what you can expect from The 5 Minute Wrapup in the coming months and years.

More Views on News

Most Popular

The One Real Estate Stock to Buy Now(The 5 Minute Wrapup)

Feb 13, 2019

The real estate sector is ready to make a comeback. This is the stock to consider buying.

Don't Be Afraid of the Market; Buy Stocks Like This One(The 5 Minute Wrapup)

Feb 14, 2019

During this tough period in the market, a contrarian approach holds huge potential upside for this Smart Money Secrets stock.

Small Caps Under Seige: Could This Be A Once-in-a-Decade Wealth Creating Opportunity?(Profit Hunter)

Feb 14, 2019

Don't let the dark clouds hovering over small caps scare you into hiding; it will rain gold as sentiments recover. Indeed, there is a blood bath. And if you are a first time investor, the correction is deep enough to scare you out of markets.

The 4-Point Plan to Accelerate India to a 10 Trillion Dollar Economy(The 5 Minute Wrapup)

Feb 12, 2019

Two questions I have been eagerly waiting to ask you ever since Budget 2019 was announced.

The Train to 'Small-Cap-Profits Land' is Back on the Station!(Profit Hunter)

Feb 15, 2019

Why its great news that prices for small caps over the last few days have been falling like there's no tomorrow.

More

Get the Indian Stock Market's
Most Profitable Ideas

How To Beat Sensex Guide 2019
Get our special report, How to Beat Sensex Nearly 3X Now!
We will never sell or rent your email id.
Please read our Terms

MERCK LTD SHARE PRICE


Feb 22, 2019 01:49 PM

TRACK MERCK LTD

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

MERCK LTD 8-QTR ANALYSIS

COMPARE MERCK LTD WITH

MARKET STATS