Wockhardt’s Q4 Net At Rs 334 Crore, Declares Dividend After 5 Years

Pharma company Wockhardt declared it Q4 results on Monday, May 27. The company reported a 26% rise in its topline to touch Rs 1485 crore, and its net profit for the quarter is at Rs 334 crore against a loss of Rs 197 crore a year ago. Wockhardt has also declared a dividend of Rs 5 after the gap of five years.

This is the fifth consecutive quarter wherein it has reported an EBITDA margin in excess of 35%. This stood at 37.47% against 38.94% in Q3FY13 and 35.88% in Q4FY12. Besides, it is noteworthy that the company has seen its margins expand for each quarter in FY13. It has also reported lower employee costs. Moreover, as a percentage of sales, its material costs, stock in trade and depreciation have all declined on a year-on-year basis, which chipped in towards the margins.

During the quarter, Wockhardt reported a loss of Rs 25 crore on account of exchange fluctuations. Last year it had reported a profit of Rs 54 crore on this front.

The company has not provided geographical revenue details, hence at the moment it is difficult to analyse how its key territories have performed in the quarter.

The shares of this company have been under pressure after the company received a US FDA alert on its Aurangabad manufacturing facility. The stock lost more than 25% in the last week, but has shown some recovery today. Fresh buying was already expected after brokerage houses gave an 'outperform' rating for the counter. Value buying has been seen in the stock, which is trading at 9x its FY13 EPS of Rs 143. The slight overreaction in the counter seems to be over at the moment.

Following the US FDA alert, Chairman Habil Khorakiwala told analysts that the impact of the US FDA alert on its topline would be close to USD 100 million and the margins too would fall by about 2%. We estimate that the company will report an 8%-9% revenue growth in FY14. As per our reckoning, at its current price of Rs 1277, the stock is available at 8.6x its FY14 EPS of Rs 148.

There was a point of time when Wockhardt commanded a price-to-earnings ratio of 15x. However, in view of the US FDA alert, we put a conservative price target of Rs 1925 per share, which would give an upside of 51% from the current price. If the issues with the US FDA are resolved, then a price of Rs 2200 would also be in sight. Considering these factors, we would advise buying the stock at its current price. Existing shareholders should not sell the stock. Rather, they should track the counter and keep adding the stock to their portfolio on dips.