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Lower Operating margins due to rural and OTC
initiatives
Aventis's Q4CY10 net revenues grew 19.7% y-o-y to Rs 3.1 bn higher than our
estimates of Rs.2.8 bn due to strong performance in the domestic formulations
space. The company reported EBITDA margins of 13.5% lower than our
expectation of 17.1% for Q4CY10 primarily due to higher other expenses relating
to the companies PRAYAS and OTC initiatives. Net profit for the quarter was
reported at Rs. 1049 mn (including extraordinary income of Rs.757 mn) (our
estimates Rs.351 mn). The company has also embarked on the Prayas initiative
to tap the rural population which may be margin dilutive. We have upgraded
our revenue estimates by 3% for CY11 and CY12 to Rs.13.3 bn and Rs.15.1 bn
respectively. However, in lieu of higher other expenses due to various initiatives
of the company we have downgraded our EBITDA margins for CY11 from 20.4%
to 18.6% and for CY12 from 21.1% to 18.5%. The company is currently quoting
at 20.2.x CY 11E excluding cash of Rs 283. We downgrade our EPS estimates for
CY 11E by 8 % to Rs 76.3 and for CY12E by 11.9 % to Rs 85.9. We value the core
price at Rs 1718 based on 20x CY 11E and add cash per share of Rs 317 per
share. We rate the stock as Market Performer with a price target of Rs 2035
(downgrade of 6.4 %).
• Domestic revenues grew 22.5% y-o-y to Rs.2.2 bn higher than our estimates
of Rs 2.1 bn on the back strong performance of its key products. Export
revenues grew 15.1% y-o-y to Rs.625mn higher than our estimates of Rs
477 mn. Majority of exports sales is to sanofi-aventis group companies.
Higher material costs and higher other expenses impacted margin
performance for the quarter.
Key highlights
• The Domestic business continues to be driven by company's key brands namely
Cardace(CVS), Lantus (insulin), Amaryl (anti-diabetic), Allegra (anti-allergy),
Soframycin (topical), Combiflam (NSAID) and Avil (anti-histamine). The company
enjoys significant market share for these products in the domestic market.
• Export business consists of brands namely Festal, Panadeine and Daonil. Some of
the key export markets for the company are Russia, Ukraine, Australia, Sri-Lanka,
Malaysia, Singapore and Hong kong. Majority of the export sales comes from
export to its group companies.
• The company sold 49 % stake in its JV Chiron Behring vaccines Pvt Ltd for a sale
consideration of USD 23 mn. The company has declared a one time dividend of Rs
28 per share arising from the sale of its shareholding in Chiron Behring vaccines
Pvt Ltd.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Lower Operating margins due to rural and OTC
initiatives
Aventis's Q4CY10 net revenues grew 19.7% y-o-y to Rs 3.1 bn higher than our
estimates of Rs.2.8 bn due to strong performance in the domestic formulations
space. The company reported EBITDA margins of 13.5% lower than our
expectation of 17.1% for Q4CY10 primarily due to higher other expenses relating
to the companies PRAYAS and OTC initiatives. Net profit for the quarter was
reported at Rs. 1049 mn (including extraordinary income of Rs.757 mn) (our
estimates Rs.351 mn). The company has also embarked on the Prayas initiative
to tap the rural population which may be margin dilutive. We have upgraded
our revenue estimates by 3% for CY11 and CY12 to Rs.13.3 bn and Rs.15.1 bn
respectively. However, in lieu of higher other expenses due to various initiatives
of the company we have downgraded our EBITDA margins for CY11 from 20.4%
to 18.6% and for CY12 from 21.1% to 18.5%. The company is currently quoting
at 20.2.x CY 11E excluding cash of Rs 283. We downgrade our EPS estimates for
CY 11E by 8 % to Rs 76.3 and for CY12E by 11.9 % to Rs 85.9. We value the core
price at Rs 1718 based on 20x CY 11E and add cash per share of Rs 317 per
share. We rate the stock as Market Performer with a price target of Rs 2035
(downgrade of 6.4 %).
• Domestic revenues grew 22.5% y-o-y to Rs.2.2 bn higher than our estimates
of Rs 2.1 bn on the back strong performance of its key products. Export
revenues grew 15.1% y-o-y to Rs.625mn higher than our estimates of Rs
477 mn. Majority of exports sales is to sanofi-aventis group companies.
Higher material costs and higher other expenses impacted margin
performance for the quarter.
Key highlights
• The Domestic business continues to be driven by company's key brands namely
Cardace(CVS), Lantus (insulin), Amaryl (anti-diabetic), Allegra (anti-allergy),
Soframycin (topical), Combiflam (NSAID) and Avil (anti-histamine). The company
enjoys significant market share for these products in the domestic market.
• Export business consists of brands namely Festal, Panadeine and Daonil. Some of
the key export markets for the company are Russia, Ukraine, Australia, Sri-Lanka,
Malaysia, Singapore and Hong kong. Majority of the export sales comes from
export to its group companies.
• The company sold 49 % stake in its JV Chiron Behring vaccines Pvt Ltd for a sale
consideration of USD 23 mn. The company has declared a one time dividend of Rs
28 per share arising from the sale of its shareholding in Chiron Behring vaccines
Pvt Ltd.
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