• APRIL 30, 2001

Knoll Pharma: Better days ahead

Knoll Pharmaceuticals, (formerly Indian subsidiary of Knoll AG) has declared a drop in net profit for 1QFY02 by 23%. Knoll Pharma is the leading player in the domestic insulin, anti-diabetic, pain control, antacid market. The drop in net profit was in line with our expectations following a cut in Ibuprofen prices by NPPA in January this year. Ibuprofen is a bulk drug which is used in pain management segment. As Knoll Pharma is a market leader in Ibuprofen market, the price cut had a severe impact on the company's financials.

(Rs m) 1QFY01 1QFY02 % Change
Sales 731 813 11.2%
Other Income 37 25 -32.4%
Expenditure 608 701 15.3%
Operating Profit (EBDIT) 123 112 -8.9%
Operating Profit Margin (%) 16.8% 13.8% -18.1%
Interest 1 1 0.0%
Depreciation 12 11 -8.3%
Profit before Tax 147 125 -15.0%
Extraordinary Income     -
Tax 28 33 17.9%
Profit after Tax/(Loss) 119 92 -22.7%
Net profit margin (%) 16.3% 11.3%  
No. of Shares (eoy) (m) 16 16  
Diluted Earnings per share* 29.4 22.7  
P/E (at current price) 10.2 13.3  
(*- annualised)      

But there's some good news on the cards also. In March, NPPA did an upward revision of four formulations of Insulin injection. The insulin vial prices have been increased in the range of 22-25%. Insulin is the biggest revenue churner for Knoll where the company has a market share of close to 60%. However, since the price revisions become effective only after 15 days from the notification, the impact will only be felt in the coming quarter.

The stock is currently trading at a P/e multiple of 11 times our projected earnings for FY02. Meanwhile, Abbot Labs has made an open offer at Rs 328 per share to the shareholders of Knoll Pharma covering 20% of the company's equity. This follows Abbot's acquisition of Lupharma UK Holding One Ltd. which in turn holds a 51% stake in Knoll Pharmaceuticals.

Though the prospects of the company look bright in light of recent price revision of Insulin as also further price revisions expected in the coming months, the open offer price (which is 9% above the current market price) seems to be an impediment for the stock performance in the near term.

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 (Research Analyst) bearing Registration No. INH000000537 (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, Canada or the European Union countries, 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 (Research Analyst)
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