PFIZER INDIA : Target 1,771 :: Anand Rathi

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PFIZER INDIA                                          Price  1230                                                                                          Target 1771

Company Description

~ Company Description

Pfizer is a subsidiary of Pfizer Inc. US the worlds largest pharma giant. Its business segments include pharma, & services. The pharma business comprises of manufacturing and trading of bulk drugs and formulations and also includes rendering of marketing services. The animal health business has a presence primarily in the large animal health and poultry market segments, and also includes rendering of marketing services. The services - clinical development operations primarily include conducting clinical trials, new product development and undertaking comprehensive data management for new drug development. Pfizer`s product portfolio includes therapeutic classes from vitamins supplements and nutritionals to antibiotics and cardiovasculars.

Investment Argument

~Brand Equity

~Strong Product Portfolio

~Increasing Penetration

~Strong Parent support

~Wyeth merger with Pfizer could be potential trigger

~Business Segments

~Valuation & Key Trigger

  

Valuation & Key Trigger

Pharma major Pfizer Ltd (India) has approved setting up of a new subsidiary as part of plans to hive off the company's animal health business. The board has approved the incorporation of a wholly owned subsidiary in Maharashtra "with a view to spin off its animal health business to such entity as a pre-step to subsequent sale to a wholly-owned subsidiary of Pfizer Inc.

This process is a part of a global internal re-organisation, taken up by its parent Pfizer Inc in July 2011, under which it was reviewing strategic alternatives for its global animal health business.

American media reported in July 2011 that Pfizer is officially looking to sell or spin off its animal health and nutritional units and they appointed JP Morgan & Morgan Stanley to explore the opportunities and expected to complete the sale in 24 months time frame. (http://dealbook.nytimes.com/2011/07/07/pfizer-puts-animal-health-and-nutrition-businesses-on-the-block/)

An independent Global research firm has valued Pfizer Animal Health Division is likely to fetch $14 billion to $18 billion in a sale which is almost 3.5 to 4 times of its FY11 sales ($ 4184mn). Indian Animal division of Pfizer India has sales of $ 23.34 and which gives the business value of $ 93.368mln (Rs. 4668.4 mn).

On a valuation matrix stock is trading at EV/EBIDTA of 11.54 (1yr. Fwd. basis) while peer group is trading around 16-18 range. Pfizer is in process of launching different generic drug in a country which will boost top line and bottom line going forward. We valued the company based on 18x and arrived a price target of Rs. 1771 which is 44% upside from current level.

Globally animal division OPM is 48% while India’s animal segment OPM is around 12-16% while pharma business OPM is more than 20%. Wyeth merger and sales of animal division can be key catalyst for the stock.

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