Niche products, US sales boost Wockhardt: Finquest

Anand Bagaria, senior research analyst, Finquest explains to CNBC-TV18 that pharma major Wockhardt has posted a strong run in terms of a stock performance as well as fundamentals and gained over 250% from the start of the year.

Below is an edited transcript of the analysis. Q: What exactly did you make of Wockhardt in terms of the fundamentals this quarter? What would be your target price for the stock at this point considering that it has already recorded such as huge run-up?
A: We had initiated Wockhardt at Rs 350. We continue to maintain a bullish outlook that we formed last year. We have set a target of Rs 1,400 over a one year time-horizon for the stock.
The fundamentals have been improving over the last 10 quarters. This improvement is due to sales performance in the US. Wockhardt's main strategy was to market and gain approval for products with a niche advantage. The product-line consists of niche and high-margin products.
These are the products on which the company has shown strong growth in profitability. We expect these products to continue to post good growth in the near future. Q: What is the debt situation for Wockhardt? How concerned would you be regarding the CDR process? Do you think the worst is over?
A: We can definitely say that the worst is over. Wockhardt had, in the past, nearly Rs 3,300 crore of debt along with lower visibility and problems with FCCB repayment.
Currently, Rs 200 crore is pending and Wockhardt management has stated that the amount is expected to be paid in August as per court directions.
With regards to the debt situation, at present the debt-to-equity ratio is below 1 and we are forecasting a debt-to-equity ratio of 0.3% by FY13 March. We feel that the proceeds from the nutrition business, which is around Rs 1,280 crore, will be used for the repayment of debt. At present, I don't think there is any fear regarding debt.