Buy Wockhardt; target of Rs 2160: Emkay

Emkay Global Financial Services is bullish on Wockhardt and has recommended buy rating on the stock with a target of Rs 2160 in its November 15, 2012 research report.

“Wockhardt, US business which contributes 48%, grew by 47% in INR and 22% YoY in $ terms to USD 118mn. However, it was flat QoQ. Co. launched 4 new products in Q2’13 and 8 in H1’13, which will ramp up going forward. Co. launched Comtan as a sole AG on 1st October which has a USD 90 million market. EU which contributes 26% grew 6% on back of 7% growth in UK operations and 24% growth in Ireland operations. French business continues to disappoint. India business which contributes 19% grew by just 4% due to slowdown in the acute category which contributes 84% of the domestic revenue. Co. has restructured its domestic field force which also impacted the growth Gross margins improved 900bps YoY and 800bps QoQ to 70% which led to 310 bps QoQ improvement in EBITDA Margins to 38%. Adjusted PAT grew by 57% to Rs. 3.75bn and EPS for the quarter stood at Rs. 34 and for the first half stood at Rs. 72.”

“US business, key to the company’s turnaround, to grow by 21% CAGR over FY12- 14E led by niche launches like Flonase, Comtan, Stalevo & 20 other new products. Expect domestic business to grow by 12% CAGR over FY12-14E, led by its focus on Vitamins, Respiratory, Diabetes and Pain therapy. Debt concerns plaguing the stock in the past, to cease in the next one year on the back of strong operating cash flows and sale of nutrition business.”
“Wockhardt has one of the largest and the most profitable US businesses with steady India business. It has one of the best in class operating and balance sheet ratios. Going forward, earnings will grow by 31% CAGR. We maintain BUY with TP of Rs 2160. At CMP, the stock trades at 17x FY13E and 15x FY14E EPS,” says Emkay Global Financial Services research report.  

Public holding more than 90% in Indian cos

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