Elder Pharma's traditional biz to spur growth

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Sharekhan has put a 'buy' rating on Elder Pharma with a price target of Rs 508. Joint Managing Director of Elder Pharmaceuticals, Vijay Paranjape informs that the company has a strong presence in women's healthcare, woundcare and nutraceuticals.

These traditional segments along with their presence in anti-infective markets, particularly in cephalosporin's area, would spur on the growth, he believes.

The company has taken certain initiatives to move their production facilities up north to Uttaranchal and Himachal. He informs that this would give them significant savings in terms of excise benefits as well as there would be a reduction in the total income tax that they will have to bear.

Excerpts from CNBC-TV18's exclusive interview with Vijay Paranjape:

Q: Which brands and therapeutic categories do you think will drive the kind of growth the market is expecting from you?

A: We are strong in the women's healthcare category. We are strong in the wound care segment and we have a decent presence in the nutraceuticals. So our traditional segments along with our presence in anti-infective markets, particularly in cephalosporin's area, would spur on the growth that we are anticipating to happen.

Q: Would the story of Elder largely be a domestic formulation story or do you have any major export initiatives even on the API front?

A: We have been traditionally strong on the domestic formulation sector, so that's where the major growth will come from. But we have taken certain initiatives on the export front.

Although exports constitutes less than 5% of our total turnover as of now. We feel that over the next three years or so, this contribution could increase maybe upto about 14-15%.

Q: How much can sales go up from here by the end of this financial year? Which category do you think will contribute most to your revenue?

A: The traditional categories, which constitute significantly to the revenue are the women's healthcare segment, nutraceuticals and wound care. Along with anti-infectives, these would constitute a majority of our contribution. Additionally from our FMHG (Fast Moving Healthcare Goods) sector, we would expect a contribution of around 10% of total revenues.

Q: Within your product portfolio, which ones are the high margin products or brands that you have at this point?

A: Shelcal, as a brand, gives us good profitability along with some of the wound care segment products, which has decent profitability. Certain injectable cephalosporin also give us good profitability.

Q: Sharekhan feels that you could do something like Rs 75 crore in profits in FY08, which is next year, would translate to Rs 40 EPS - is that possible?

A: We have taken certain initiatives to move our production facilities up north to Uttaranchal and Himachal. These would give us significant savings in terms of excise benefits as well as there would be a reduction in the total income tax that we will have to bear.

This, alongwith the constant re-shuffling that we are doing to enhance our product portfolio contribution could give us significant upside on the bottomline. Whether it would be Rs 40 earnings per share or whether it will be a range of Rs 38-42, is difficult to say.

Q: In terms of sales, what do you think you might do in the next financial year?

A: We have been achieving a growth of around 25% cumulative for the last three years. We are confident of maintaining that growth rate for at least next two-three years.