Aventis Pharma a market performer: Karvy Stock Broking

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Aventis Pharma a market performer: Karvy Stock Broking

Karvy Stock Broking is bullish on Aventis Pharma and has recommended a market performer rating on the stock with a target of Rs 2035 in its February 17, 2011 research report.

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Karvy Stock Broking is bullish on Aventis Pharma and has recommended a market performer rating on the stock with a target of Rs 2035 in its February 17, 2011 research report.

"Aventis's Q4CY10 net revenues grew 19.7% y-o-y to Rs 3.1 bn higher than our estimates of Rs.2.8 bn due to strong performance in the domestic formulations space. The company reported EBITDA margins of 13.5% lower than our expectation of 17.1% for Q4CY10 primarily due to higher other expenses relating to the companies PRAYAS and OTC initiatives. Net profit for the quarter was reported at Rs. 1049 mn (including extraordinary income of Rs.757 mn) (our estimates Rs.351 mn). The company has also embarked on the Prayas initiative to tap the rural population which may be margin dilutive. We have upgraded our revenue estimates by 3% for CY11 and CY12 to Rs.13.3 bn and Rs.15.1 bn respectively. However, in lieu of higher other expenses due to various initiatives of the company we have downgraded our EBITDA margins for CY11 from 20.4% to 18.6% and for CY12 from 21.1% to 18.5%. The company is currently quoting at 20.2.x CY 11E excluding cash of Rs 283."

"Domestic revenues grew 22.5% y-o-y to Rs 2.2 bn higher than our estimates of Rs 2.1 bn on the back strong performance of its key products. Export revenues grew 15.1% y-o-y to Rs 625mn higher than our estimates of Rs 477 mn. Majority of exports sales is to sanofi-aventis group companies. Higher material costs and higher other expenses impacted margin performance for the quarter."

"We downgrade our EPS estimates for CY 11E by 8 % to Rs 76.3 and for CY12E by 11.9 % to Rs 85.9. We value the core price at Rs 1718 based on 20x CY 11E and add cash per share of Rs 317 per share. We rate the stock as Market Performer with a price target of Rs 2035 (downgrade of 6.4 %)," says Karvy Stock Broking research report.

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