The integration with Wyeth, strong brands and a pile of cash are positives for the stock.
Pfizer’s results include the numbers of its wholly-owned subsidiary, Duchem Laboratories, which has been merged with it effective December 1, 2008. While the results are strictly not comparable, given Duchem’s small size, its influence on Pfizer’s quarterly numbers is far from significant.
Nevertheless, Pfizer’s quarterly sales were not too exciting (lower than the sector average) with revenues up 10 per cent to Rs 203 crore, led by 9 per cent growth in the pharmaceutical business, which accounted for about 84 per cent of the turnover. While animal health business saw 22 per cent revenues growth to Rs 25 crore, the clinical development business saw revenues decline 18 per cent to Rs 6.6 crore.
Operating profit margins were up slightly at 15 per cent due to the drop in prices of Vitamin C over the previous year. However, margins were down 938 basis points sequentially due to the reduction in prices of Becosules (a vitamin supplement) and higher other expenditure. Becosules is the second-largest brand for the company after Corex (an expectorant) and grosses Rs 122 crore a year.
Going ahead, analysts expect Pfizer (excluding Wyeth India’s numbers, which is expected to be integrated with Pfizer following the international acquisition) to report sales growth of 13 per cent to about Rs 900 crore with operating profit margins at the 20 per cent plus levels in the current financial year. Expect growth and margin improvement (post integration) to come from new products as well as Pfizer and Wyeth’s brands, nine of which are in the Top-150 list.
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At Rs 940.80, the stock is trading at 15.7 times the 2009-10 estimated earnings of Rs 60. Considering that Pfizer is sitting on a cash pile of Rs 860 crore (Rs 288 per share) and growth prospects seem bright, investments at these levels could pay rich dividends.
With contributions from Jitendra Kumar Gupta & Ram Prasad Sahu