Wyeth's results demonstrate the pay-off from the steps taken by the company to restructure and also improve its operational efficiency. |
The company's consolidated operating profit (excluding other income and profit on sale of assets) grew an impressive 392 per cent to Rs 70 crore in FY06 compared with an 11.2 per cent growth in income from operations to Rs 287.28 crore. |
In addition, the operating profit margin grew a staggering 1887 basis points y-o-y to 24.36 per cent for FY06. |
The street, however, appears to have ignored the improved performance of the company. |
The stock has declined nearly 27 per cent over the past four months compared with 6.85 per cent fall in the Sensex. Profit growth for the company has been aided by staff costs shrinking nearly 51.35 per cent y-o-y to Rs 41.45 crore in FY06. |
Staff costs in FY06 included a VRS payment of Rs 8.19 crore compared with Rs 40.25 crore a year earlier. It is understood that the company has trimmed its workforce by nearly 30 per cent over the past few years to around 1240 levels at present. |
As part of its restructuring exercise, the company had also disinvested its bulk drug manufacturing in FY05. The company had used these facilities for API exports, but these typically have a low-profit margin. |
Lower staff costs helped to offset the 156 per cent y-o-y rise in purchase of goods for resale to Rs 47.56 crore in FY06. |
This rise in costs is partly due to higher excise duty paid on formulations bought from third parties, say analysts at domestic brokerage houses. |
Meanwhile, the company also saw improved demand for its offerings in segments such as hormone therapy, anti-infectives and vaccines. |
In the March 2006 quarter, the company's operating profit amounted to Rs 4.24 crore compared with an operating loss of Rs 43.24 crore a year earlier. |
Wyeth USA has set up a wholly owned subsidiary in India, but it recently revoked its decision for the planned Indian launch of its product Prevenar, a pneumococcal vaccine to combat meningitis and blood infections, through this subsidiary, which was a shareholder-friendly move. At Rs 560, the Wyeth stock appears reasonably valued at about 11.9 times estimated FY07 earnings. |
EIH : Good show |
EIH Ltd has posted a strong performance in FY06, with consolidated net sales rising 27.5 per cent to Rs 813.49 crore. |
What is more impressive though is the company's operating profit (before forex losses) rising 63.5 per cent. Its operating profit margin went up by a huge 727 basis points to 33.02 per cent. |
The company has benefited from huge tourist inflow, which has resulted in several hotels operating at full occupancy on many days, especially in its target segment of business tourists. |
In the March 2006 quarter, net sales growth and operating profit growth were better at 28.6 per cent and 65.56 per cent, respectively. |
Operating profit margin at 35.54 per cent was also above market expectations. The stock has declined 14 per cent, compared with an 8.8 per cent dip in the Sensex since May 31. |
Going forward, demand for hotels remains robust and as its new Mumbai property in the |
Bandra-Kurla Complex should bring growth as it comes up later this year. Analysts also expect some more land sales in other cities, which will be used to retire some of its debt and for new investments. |
EIH has been restructuring its operations in 2005-06, and had sold 30 acres of land in Gurgaon in the first nine months. Late last week, its shareholders approved the transfer its properties in Shimla and Bhubaneshwar to group company, EIH Associated, in which it holds 24 per cent stake. |
EIH is expected to get more returns as a result of this transfer compared with operating these two properties. After this announcement, the stock went up 2.8 per cent to Rs 585 on Monday. |
At its current price, the stock trades at a trailing 12-month price-earnings multiple of 25 times excluding the extraordinary item. If the profit on sale of land is considered, its P/E works out to 15.7 times. |