Brokerage house Firstcall Research has recommended hold rating on Novartis India with a price target of Rs 394, in its August 21, 2013 research report.
Firstcall's research report on Novartis India
"Novartis India, subsidiary of Swiss major Novartis reported increase in its net profit by 1.62 percent in Q1 FY14 over the corresponding quarter in the previous year. The profit from operations and PAT for the quarter fell by 90.6 percent and 48.6 percent respectively. The stock price touched 52 week low after the results were announced. Novartis India is a midcap company functioning in a highly fragmented and competitive generic pharma industry. Novartis imports 45-47 percent of its raw material annually and also some of its products for marketing and selling in India. Thus rupee depreciation which has been 12 percent since May 2013 has impacted the profit margins of the company in this quarter. In addition to that, slow growth of the economy and DPCO price policy has hit the profitability of Novartis India. The company has also been denied patent protection for 'Glivec' as per the Supreme Court ruling on 1st April 2013. Thus low cost generic production of 'Glivec' will further impact its margins."
"The revenue of Generic division of Novartis India has reduced by 5 percent in Q1 FY14 as compared to the corresponding quarter in the previous year. The revenues of Pharmaceutical and Animal Health division increased by 0.48 percent and 16.4 percent respectively in Q1FY14 over the corresponding quarter in FY13. The OTC division revenues were stagnant during the current quarter. The company has no long term and short term borrowings as on 31st March 2013. The total expenditure of the company has also increased by only 10 percent in the current quarter compared to Q1 FY13. Thus low profit margins have been mainly due to low sales which have been impacted by high inflation, low GDP growth, non recognition of patents and falling rupee. Thus we recommend 'HOLD' for the scrip with a target price of Rs 394," says Firstcall Research report.
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