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INDIA Pharma

Wyeth
Q4FY12 Result update/Estimate change 22 May 2012
Key Data
Recco (Prev) Target (Prev) CMP Upside (%) Buy (Buy) Rs1,353 (Rs1,267) Rs854 58.5% Bloomberg Code Reuters Code Current Shares O/S (mn) Diluted Shares O/S(mn) Mkt Cap (Rsbn/USDmn) WYH IN WLED.BO 22.7 22.7 19.4/350.5 1,075/794 5,142 10

Brands driven growth


Wyeth Q4FY12 results were better than our expectations. The company reported 25%YoY sales growth against the industrys 15%. The results of the two quarters are not comparable as the previous quarter was 4m period ending 31st March11. Wyeths EBIDTA margin declined by 270bps YoY from 38.2% to 35.5% due to an increase in material cost and other expenses. The companys other income grew by 28%YoY from Rs60mn to Rs77mn. Wyeths tax rate has come down from 32.6% to 30.5% of PBT. Net profit grew by 23%YoY. Wyeth has cash per share of Rs160. We have retained Buy rating for the scrip with a target price of Rs1353 (based on15x FY14E EPS of Rs90.2). Strong revenue growth: During the quarter, the pharma business (94% of revenues) grew by 26%YoY from Rs1.19bn to Rs1.50bn. OTC business (6% revenues) grew by 12% from Rs80mn to Rs89mn. Margin under pressure: Wyeth reported 270bps drop in EBIDTA margin from 38.2% to 35.5% due to the increase in material cost and other expenses. Wyeths material cost increased by 180bps from 32.6% to 34.4% of revenues due to the increase in cost of imported raw materials, with the depreciation of rupee. Other expenses grew by 240bps from 22.7% to 25.1% due to higher marketing expenses. The PBIT margin of pharma business dropped by 40bps YoY from 38.1% to 37.7%. PBIT margin of OTC declined by 3160bps from 19.2% to (-)12.4%.
Y/E Mar (Rsmn) Total revenues EBIDTA EBIDTA margin (%) Other income PBDIT Depreciation Interest PBT Prov. For tax % of PBT PAT Reported PAT Equity capital EPS (Rs) Q4FY12 Q4FY11* 1,587 564 35.5 77 640 10 2 629 192 30.5 437 437 227 19.2 1,273 486 38.2 60 546 16 2 528 172 32.6 356 356 227 15.7 YoY (%) 24.6 16.0 28.0 17.3 (41.4) 53.3 19.0 11.4 22.7 22.7 22.7 Q3FY12 QoQ (%) Q4FY12E Var (%) 1,384 282 20.4 76 358 17 1 341 95 27.8 246 246 227 10.8 14.6 99.6 0.9 78.7 (42.8) 91.7 84.5 103.0 77.4 77.4 77.4 1,565 351 22.4 82 433 17 1 415 118 28.4 297 297 227 13.1 1 61

Price Performance (%)*


1M Wyeth NIFTY (6.8) (8.0) 6M (12.5) 1.1 1Yr (3.0) (11.3)

52 Wk H / L (Rs) Daily Vol. (3M NSE Avg.) Face Value (Rs) USD = Rs55.4

*as on 21st May 2012 Source: Bloomberg, Centrum Research

Trend in EBIDTA margin QoQ (%)


45.0 40.0 35.0 30.0 25.0 20.0 15.0 10.0 5.0 0.0

38.2

37.6 28.7 20.4

35.5

Q4FY11*

Q1FY12

Q2FY12

Q3FY12

Q4FY12

(6) Source: Company, Centrum Research *proportionate figures for 3m ending March11 48 (44) Trend in Material Cost QoQ (%) 130 45.0 51 40.0 63 35.0 47 47 0 47
30.0 25.0 20.0 15.0 10.0 5.0 0.0

32.6

31.7

37.4

39.1

34.4

Source: Company, Centrum Research *proportionate figures for 3m ending March11

Q4FY11*

Q1FY12

Q2FY12

Q3FY12

Q4FY12

Brands doing well: Four out of six leading brands of Wyeth reported a growth rate higher than market growth of 15%. These are, Mucaine antacid 20.7%, Ovral L oral contraceptive 39.1%, Ativan sedative 15.6% and Prevenar 13 pnemonia vaccine 137.1%. Excellent growth of Prevenar 13: As per IMS MAT-Mar12 data, Prevenar 13, the companys pneumococcal vaccine has reported annual sales of Rs330mn and a growth rate of 137.1% in the domestic market. This is despite stiff competition from Synflorix of Glaxo SK Pharma, which was launched in Dec11 at around half the price of Prevenar. Attractive valuations, Reiterate Buy: We expect Wyeth to report good growth in the domestic market due to its strong brands and its leading position in oral contraceptives (OC) and vaccines. We have revised the EPS estimates upwards by 9% for FY13 and 7% for FY14. At the CMP of Rs854, the stock trades at 11.2x FY13E EPS of Rs75.9 and 9.5x FY14E EPS of Rs90.2. We reiterate the Buy rating for the scrip with a target price of Rs1353 (based on 15x FY14 earnings).
Rev YoY (%) EBITDA EBITDA (%) Adj PAT YoY (%)

Source: Company, Centrum Research *proportionate figures for 3m ending March11

Earning Revision
FY13E Particulars Sales EBITDA EBITDA margin (%) Net Profit EPS (Rs) Current 6,980 2,202 31.5 1,725 75.9 Earlier Chg (%) Current 7,003 2,004 28.6 1,588 69.9 (0.3) 9.9 290bps 8.6 8.6 8,219 2,623 31.9 2,050 90.2 FY14E Earlier Chg (%) 8,220 (0.0) 2,415 8.6 29.4 250bps 1,919 6.8 84.5 6.8

Source: Company, Centrum Research

Ranjit Kapadia ranjit.kapadia@centrum.co.in +91 22 4215 9645


Fully DEPS RoE (%) RoCE (%) P/E (x) EV/EBITDA (x)

Y/E Mar (Rsmn) FY11(16 months) FY12 FY13E FY14E FY15E

6,365 5,941 6,980 8,219 9,636

11.1 24.5 17.5 17.8 17.3

2,222 1,834 2,202 2,623 3,122

34.9 30.9 31.5 31.9 32.4

1,653 1,449 1,725 2,050 2,441

40.0 16.9 19.0 18.8 19.1

72.7 63.8 75.9 90.2 107.5

37.4 33.5 32.0 30.8 29.7

37.2 33.4 32.0 30.8 29.7

11.7 13.4 11.2 9.5 7.9

7.5 10.3 8.5 7.1 5.9

Source: Company, Centrum Research Estimates

Please refer to important disclosures/disclaimers inside


Centrum Equity Research is available on Bloomberg, Thomson Reuters and FactSet

Financials
Exhibit 1: Income Statement
Y/E March (Rs mn) Net Sales Growth (%) Operating Expenses % of sales EBIDTA EBIDTA margin (%) Depreciation EBIT Interest Income/(exps.) PBT from operations Other non op. income PBT PBT margin (%) Provision for tax Effective tax rate (%) Net profit Growth (%) Net profit margin (%) FY11(16m) 6,365 11.1 9,857 154.9 2,222 34.9 90 2,132 (6) 2,125 231 2,357 37.0 704 29.9 1,653 26.0 FY12 5,941 24.5 9,087 152.9 1,834 30.9 59 1,776 (10) 1,766 287 2,052 34.5 603 29.4 1,449 24.4 FY13E 6,980 17.5 10,383 148.8 2,202 31.5 64 2,138 (9) 2,129 331 2,460 35.2 735 29.9 1,725 24.7 FY14E 8,219 17.8 11,757 143.1 2,623 31.9 71 2,552 (11) 2,542 384 2,926 35.6 876 29.9 2,050 24.9 FY15E 9,636 17.3 13,227 137.3 3,122 32.4 80 3,042 (12) 3,030 448 3,478 36.1 1,037 29.8 2,441 25.3

Exhibit 3: Cash flow


Y/E March (Rs mn) Cash flow from op. Net Profit Dep. & amortization Change in working cap. Deferred tax liability Other non-cash charges Cash flow from op. Cash flow from inv. Capex Cash flow from inv. Cash flow from fin. Dividends paid Cash flow from fin. Net Cash Flow FY11(16m) 1,653 90 (417) 3 1,329 FY12E 1,449 59 290 6 1,804 FY13E 1,725 64 358 (12) 1 2,135 FY14E 2,050 71 (451) (7) (2) 1,660 FY15E 2,441 80 (585) (0) 1,937

(60) (60)

(19) (19)

(137) (137)

(77) (77)

(158) (158)

(581) (581) 689

(486) (486) 1,299

(581) (581) 1,417

(660) (660) 924

(705) (705) 1,074

Source: Company, Centrum Research Estimates, FY11(16m) figures

Source: Company, Centrum Research Estimates, FY11(16m) figures

Exhibit 2: Balance Sheet


Y/E March (Rs mn) Share capital Reserves & surplus Total shareholder's fund Loan fund Deferred tax liability Total capital employed Gross block Accumulated depreciation Net Block Capital WIP Net fixed assets Cash and bank Inventories Debtors Ot. curr. assets & loans & adv. Tot. curr. assets & loans & adv. Current liab. & provisions Net current assets Total assets FY11(16m) 227 3,621 3,848 25 (66) 3,807 798 (542) 256 40 296 2,745 746 341 800 4,632 1,122 3,510 3,807 FY12E 227 4,584 4,811 25 (61) 4,776 847 (601) 247 10 257 4,043 1,200 545 293 6,081 1,562 4,519 4,775 FY13E 227 5,728 5,956 25 (73) 5,908 974 (664) 310 20 330 5,460 1,112 502 350 7,424 1,846 5,578 5,908 FY14E 227 7,118 7,345 25 (80) 7,290 1,046 (735) 311 25 336 6,384 1,530 722 395 9,031 2,078 6,954 7,290 FY15E 227 8,853 9,080 25 (80) 9,025 1,119 (735) 384 30 414 7,457 1,630 772 440 10,299 1,688 8,611 9,025

Exhibit 4: Key Ratios


Y/E March (Rs mn) Profitability ratios (%) EBIDTA margin PBIT margin PBT margin PAT margin Return ratios (%) ROCE ROE Turnover Ratios Working capital (days) Inventory (days) Debtors (days) Creditors (days) Per share (Rs) Basic EPS Book value Valuation P/E (x) P/BV (x) Market Cap/Sales (x) EV/EBIDTA (x) EV/Sales (x) FY11(16m) 34.9 37.1 37.0 26.0 37.2 37.4 43.9 51.3 20.5 77.5 72.7 169.4 11.7 5.0 3.0 7.5 2.6 FY12E 30.9 34.7 34.5 24.4 33.4 33.5 29.2 59.8 27.2 74.9 63.8 211.8 13.4 4.0 3.3 10.3 3.2 FY13E 31.5 35.4 35.2 24.7 32.0 32.0 6.2 60.5 27.4 75.9 75.9 262.1 11.2 3.3 2.8 8.5 2.7 FY14E 31.9 35.7 35.6 24.9 30.8 30.8 25.3 58.7 27.2 75.6 90.2 323.3 9.5 2.6 2.4 7.1 2.3 FY15E 32.4 36.2 36.1 25.3 29.7 29.7 43.7 59.8 28.3 76.3 107.5 399.7 7.9 2.1 2.0 5.9 1.9

Source: Company, Centrum Research Estimates, FY11(16m) figures

Source: Company, Centrum Research Estimates, FY11 (16m) figures

Wyeth

Appendix A
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Wyeth

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Wyeth