Pfizer (PFIZ@IN; CMP- Rs597; M Cap- Rs17818mn; Not Rated)
Key takeaways from Pfizer conference call
v Revenue for Q1CY09 was up by 23.7% to Rs18.6bn, driven by 18% volume growth and 6% value growth. The 18% volume growth was mainly because of removal of hurdles in the trade.
v Its pharma business grew by 24%, consumer business grew by 11% (adjusting to 4 Consumer Healthcare brands sold to J&J, growth was 30%) and Animal business grew by 38%.
v Leading brands such as Corex (Rs39cr) and Becosule (Rs20cr) grew by 29% during the quarter and Lyrica (Rs12cr) grew by 53%.
v The company has launched 6 new products in the last one year and new product contribution has increased from 2.4% to 4.5% in Q1CY09. Management has indicated that they are likely to launch 4 new patented products in next two years.
v The company has increased field force by 250 people to have better penetration and more focus on primary health care. The total sales force is now 1400.
v The IMS-ORG data of last two months shows that the company's rank increased from 14th to 10th.
v Increased Vitamin –C prices (Rs8cr additional cost in Q1CY09) has resulted 500 bps increases in Raw material prices, resulting 100 bps reduction in EBIDTA margins to 21% during the quarter.
v The company has Rs750cr cash and cash equivalent and earned Rs16cr interest income during the quarter vs. Rs11cr in corresponding quarter.
v In Q1CY08, company has sold 4 Consumer Healthcare Brands to J&J and had exceptional income of Rs2079mn. Adjusting to exceptional income; APAT grew by 5.7% to Rs390mn. The lower growth in PAT compared to revenue was mainly because of higher tax provision in Q1CY09 (35.2% vs. 26% in Q1CY08) and reduction in operating margins.
v Management has indicated that they are looking towards consolidation and may use cash to acquire interesting brands/ businesses.
v At CMP of Rs596, the stock is trading at 11.5x CY09E consensus EPS of Rs52.
v We do not have formal rating on the stock.
IVRCL Management meet
We met up with the mgmt of IVRCL to get feeling of how the business is faring 7 what are the future prospects. The mgmt has indicated that the company has witness a sharp decline in order flow in transport segment which mainly consists of road projects. Industrial segment is the other division that witnessed pressure in last fiscal due to deteriorating macro economic picture. However the mgmt is quite upbeat on water & irrigation related projects where it witnessed substantially growth in order book. This segment has huge potential from many states like AP, Maharashtra, Gujarat & Rajasthan where the govt are focusing on irrigation. The company is presently running 4 BOT projects out of which 3 are road projects while one is water desalination project. All these 4 projects are likely to start generating revenue for the company from Q1FY10 onwards 7 will add substantially to cash flow position of the company from FY10 onwards.
Though the mgmt has guided continued weak scenario for transport segment it is banking on water & irrigation projects. The company has guided for topline of Rs 6000 cr in FY10 indicating a growth of around 28% YOY & a net profit of Rs 280 cr a growth of 35%. We expect the company to clock an EPS of RS 21.5 in FY10E.
An area of concern however remains that the company has given an advance of Rs 275 cr to IVR Prime a group company. IVR Prime has stopped all the projects therefore only recourse to IVR Prime to repay this loan to parent is through selling the land that it holds. The mgmt has indicated that the current value of land with IVR Prime is around Rs 1700 cr & the mgmt of IVR Prime is willing to sell that land to repay to the parent co.
At the CMP of Rs 154 the stock is trading at 7.16x FY10E EPS. The value of 4 BOT projects comes out to be Rs 35 & the value of subsidiaries is Rs 15 (Rs 10 for IVR Prime & Rs 5 for Dorr-Oliver).
NTPC to announce flash results for FY09. Our expectations
We expect NTPC to announce flash results for the fiscal ended March 31, 2009. Our expectations are as follows:
Q4FY09 Full Year FY09
Revenue (Rs bn) 111.00 420.00
EBITDA (Rs bn) 29.00 104.00
Net Profit (Rs bn) 19.00 80.00
EPS (Rs) ~2.00 9.70
Tata Chemicals update
The mgmt of Tata Chemicals has met a few fund managers & analysts over past few days. The mgmt has given a very cautious view about the future. The main concern comes from the impending price war from Chinese manufacturers of Soda Ash. The current prices of Soda Ash & Cash cost of production for soda Ash for Chinese players is to the tune of 30% so they have an edge over international competitors to the extent of cutting prices by that much. Also most of the Chinese players are working at 75% capacity utilization. Some analysts estimate demand decline of around 25% in China. Thus only way for Chinese players to increase utilization levels is to increase exports, hence a possibility of price war.
In the past few days the stock of Tata Chemicals has witnessed a sharp run up. However since there is no change in business fundamentals & outlook remains as bleak as it was earlier we expect the stock to witness a correction in near future. At the CMP the stock is trading at ~6x FY10E EPS of Rs 24.70. We maintain reduce rating on the stock with a target price of Rs 140.
Global Cues:
On Tuesday the US mkts tumbled as expected for past few sessions on the back of earnings sessions kick started by Alcoa. The numbers from Alcoa were below the expectations leading to revival of earlier concerns that corporate earnings will take big hit this fiscal. The stocks of tech majors Cisco & Research in Motion also witnessed sharp declines. The Dow ended the day with a loss of 186 odd points.
Asian mkts are trading jittery after the fall in US mkts. All have lost between 2-3%. SGX is also trading with significant cut of 103 points.
Our Markets: On Monday the first signs of profit booking were witnessed though the momentum was positive. However as we have been expecting for last few sessions the first signals were evident but since the session was sandwiched between holidays we did witness correction.
The decline in global mkts over the holiday has given the trigger for correction in our mkts. SGX is suggesting an opening with a strong gap down today. We believe the correction is overdue & that should happen for the good of mkts. However again this week is truncated & it is early to say that the positive momentum built in the mkts is over but we definitely remain cautious of this rally as we have been doing for past few days.
Doable Ideas:
IVRCL & Pfizer may be looked at as investing ideas.
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