Sunday, March 28, 2010

Pfizer: In-line with our estimate; maintain buy; Target: Rs1,040

Pfizer Ltd

Reco: BUY

CMP: Rs956

Target Price: Rs1,040

In-line with our estimate; maintain buy

Pfizer Q1CY10 results are in-line with expectations with a) 9% revenue growth to Rs2.07bn, b) 200bps expansion in operating margins to 24.9% and c) 9% growth in APAT to Rs425mn. Revenue growth was largely driven by 15% growth in service business and 9% growth in pharma segment. Despite higher raw mat cost (up 24% qoq and 12% yoy), operating margins for the quarter expanded by 200bps yoy to 24.9% because of a) 200bps reduction in employee cost and b) 100bps reduction in other expenditures. Higher depreciation cost (up by 14%) and lower interest income (declined by 16% to Rs155mn) restricted the PAT growth at 9% to Rs425mn. Going forward, we expect company to grow in-line with the industry growth on the back of a) new launches both from parent's pipeline as well as branded generic portfolio, b) focus on key brands and c) market expansion in the rural areas. We are of the view that Pfizer-Wyeth merger in India will lead to the re-rating of the stock. We maintain our earnings estimate of Rs56.7 and Rs65.6 for CY10E and CY11E respectively and re-iterate our buy rating with a price target of Rs1,040.

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