Wockhardt
A healthy dose
The company is managing its global acquisitions well and is growing at healthy rate
| Buy | Wockhardt |
| BSE Code | 532300 |
| NSE Code | WOCKPHARMA |
| Bloomberg | WPL@IN |
| Reuter | WCKH.BO |
| 52-week High/Low | Rs 450 / 295 |
| Current Price | Rs 341 (as on 20th February 2008) |
Wockhardt is a global pharmaceutical and biotechnology company that has grown by leveraging two powerful trends impacting the world of medicine - globalisation and biotechnology. Today more than 65% of its revenue comes from Europe and the United States. Wockhardt’s market presence covers formulations, biopharmaceuticals, nutrition products, vaccines and active pharmaceutical ingredients (APIs).
The company has an active multi-disciplinary R&D programme employing over 400 scientists. It has been one of the frontrunners in Biotechnology research in the country, with comprehensive all round capabilities from "Concept to Market".
The company has its headquarters in India, and has 15 manufacturing plants in India, UK, Ireland, France and US. Besides, it has subsidiaries in US, UK, Ireland and France and marketing offices in Africa, Russia, Central and South East Asia.
Its manufacturing facilities in India, UK, Ireland, France and US have the approval of major regulatory bodies, including US FDA and UK's MHRA, with capabilities for both Finished Dosage Formulations and APIs.
For the FY ended December 2007, it registered a 53% rise in sales to Rs 2,653 crore. PAT went up by 60% to Rs 386 crore.
OPM for the FY grew by 100 basis points to 24.1%. This is commendable considering the fact that it acquired new companies Negma and Montenegro and Pinewood and all of them had much lower margins.
On the India business front there has been a strategic thrust with Wockhardt signing in-licensing agreements with 6 European and US companies for 11 products, of which 5 products have already been launched in the country in the field of Dermatology, Nutraceuticals and Osteo-arthritis.
As per ORG-IMS, the domestic business recorded an annual growth of 19% vis-à-vis 13% industry growth rate. Dexolac joins Spasmo-Proxyvon in the elite ‘Top 100’ brands in India. Overall 8 brands feature in the list of ‘Top 300’ brands of the industry (ORG-IMS Dec 2007).
UK, Ireland, Germany and France recorded double-digit growth, almost twice the industry growth in these markets. The European formulation business grew 97% FTY 2007. Wockhardt UK also saw an opportunity and launched the NRT (Nicotine Replacement Therapy) in patches and lozenges forms for curbing smoker’s habit.
With the Morton Grove acquisition, Wockhardt now has a complete range of dosage forms from tablets, capsules, liquids and injectibles. Morton Grove has a portfolio of 31 products, 13 of which occupy the No.1 market position. All others are in the Top 3. The overall product range has now swelled to around 56 products for the US market, of which Wockhardt USA Inc is currently marketing 25 products. The US FDA also approved 13 ANDA’s, of which 11 products have already been launched
"In 2007 Wockhardt moved into another trajectory of globalisation and growth. Not only did sales grow by 53%, operating profit margins improved 90 basis points resulting in 60% improvement in net profit," said Wockhardt Chairman Habil Khorakiwala. "The value creation in the new acquisitions of Pinewood and Negma in Europe, contributed to the growth in profits."
Elaborating further on Wockhardt’s strategic plans for the future, Chairman Habil Khorakiwala said, "We are fundamentally focussed at consolidating, integrating, rationalising and optimising our global resources to create value for the company and all our stakeholders."
Wockhardt has a strong track record in acquisition management, with five successful acquisitions in the European market. The European business now contributes about 55% of revenues, with Wockhardt being the largest Indian company operating in this area.
In October 2007, the company acquired Morton Grove Pharmaceuticals, the leading liquid generic and specialty dermatology company in US. This company had sales revenues of dollar 52 million for the last 12 months period and with this acquisition it is now probably the largest liquid generic company globally with strong presence both in Europe and in US. A third of this company’s revenues come from branded dermatology products, which is marketed under the brand name of Lindane. In addition, the company has 31 generic products, 13 of which occupied number one market position in the market. All others are either number 2 or number 3 in the market. With this acquisition Wockhardt now have the right size of operations in US. The management is confident that this acquisition would propel the company’s growth even faster going forward. Wockhardt expects to be able to turn around Morton Grove in 6 to 9 months through both the mix of top line improvement and also through cost rationalization.
Wockhardt has in principal decided to demerge its Research & Development business into a separate entity. The new company will house the new drug discovery programme and the innovative new technologies being developed by the R&D team. The company will be a listed company and is scheduled to come into effect from January 1, 2009.
The company is enjoying a leading position in Europe and is steadily growing its market presence the US. The management is confident of achieving the corporate target of becoming a $ 1 billion company by 2009.
In FY 2008 (ending December), we expect the company to register consolidated sales and net profit of Rs 3220.98 crore and Rs 458.31 crore respectively. On equity of Rs 54.72 crore and face value of Rs 5 per share, EPS works out to Rs 41.9. The share price trades at Rs 341. P/E works out to just 8.1
| | 0512 (12) | 0612 (12) | 0712 (12) | 0812 (12P) |
| Sales | 1409.98 | 1731.48 | 2653.20 | 3220.98 |
| OPM (%) | 23.3 | 23.1 | 24.1 | 24.0 |
| OP | 328.65 | 400.27 | 639.10 | 773.04 |
| Other inc. | 42.87 | 57.27 | 11.00 | 12.65 |
| PBIDT | 371.52 | 457.54 | 650.10 | 785.69 |
| Interest | 34.40 | 40.93 | 97.40 | 121.75 |
| PBDT | 337.12 | 416.61 | 552.70 | 663.94 |
| Dep. | 42.62 | 62.06 | 78.50 | 98.13 |
| PBT | 294.50 | 354.55 | 474.20 | 565.81 |
| Taxes | 37.40 | 52.93 | 91.70 | 107.50 |
| PAT | 257.10 | 301.62 | 382.50 | 458.31 |
| EO | 0.00 | 60.37 | 0.00 | 0.00 |
| Net Profit | 257.10 | 241.25 | 382.50 | 458.31 |
| EPS (Rs)* | 23.5 | 27.6 | 35.1 | 41.9 |
| * Annualised on current equity of Rs 54.72 crore. | ||||
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