Buy Wockhardt; target Rs 1450: FinQuest Securities
FinQuest Securities is bullish on Wockhardt (WPL) and has recommended buy rating on the stock with a target price of Rs 1,450 in its May 31, 2013 research report.
June 04, 2013 / 16:00 IST
FinQuest Securities' research report Wockhardt (WPL)
WPL reported Q4FY13 inline with our estimates. Q4FY13 revenue came in at Rs 14.86 bn, 26 percent higher Yo- Y and 2 percent Q-o-Q. EBIDTA came in at Rs.5.46bn, 32 percent Y-o-Y and flat Q-o-Q. Maintenance of market share in its key products like Toprol-XL and ramping-up of market share in Flonase (from 6 percent at the start of the quarter to close to 11 percent at the end of the quarter) and other new products helped WPL to deliver good sets of results.The USFDA has imposed an import alert on WPL's Waluj facility which was followed after Form 483 received by WPL in Apr'13 for its injectables facility in Waluj plant citing deviations from cGMP. We believe the WPL has generated USD 120mn of sales from the Waluj facility in FY13 (important products sold include Comtan, Stalevo, Wellbutrin, Depakote ER etc). Out of the USD 120mn, USD 25m were towards injectible and balance towards oral dosages. WPL being an authorized generic player for Comtan and Stalevo would be able to source it from the innovator (Orion) so no impact on sales of this product but margins are expected to take a hit. Further new product approval from the plant will be stopped. We believe it would take 18-24 months for the impacted products to regain their current sales post the recent import alert. Accounting all these we cut our sales estimates by 14 percent/15 percent for FY14/FY15 and Net Income by 20 percent for FY14 and FY15.We factor in the management's comments on EBIDTA margins due to FDA import alert on Waluj plant and revise our EBIDTA margins downward to 32.5 percent for FY14 and 31.5 percent for FY15 from our earlier estimate of 35.5 percent and 34.5 percent respectively. We believe going ahead, WPL's niche products Lamictal-XR and Flonase will help it to offset the margin decline on Comtan/Stalevo due to sourcing of the latter from the innovator (post import alert).Valuations recover to take time atleast 12-18 month in our view: We revise our target price to Rs.1,450 from Rs.2,268 valuing it at a P/E of 12x for FY14E & 11.6x for FY15E and maintain our BUY rating on WPL. The stock is currently trading at a P/E multiple of 9.3x for FY14E and we believe its valuation multiple recovery could take time until the USFDA issues are cleared which could be 12-18 months away," says FinQuest Securities research report.Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions. 
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