• Investment World
• eWorld
• Catalyst
• Mentor
• Life
• Canvas
• Praxis
• Urban Pulse
• Brand Quest

Nath Balakrishnan

SHAREHOLDERS can retain their holdings in the Pfizer stock. With two mergers (of Parke Davis and Pharmacia) behind it, Pfizer can now focus on driving growth in the domestic market operations. At the current market price of Rs 700, the stock trades at a multiple of about 25 times its expected sustainable per share earnings for the fiscal year ending November 2005.

For the quarter-ended February 2005, Pfizer's sales dropped by 2 per cent compared to the year-ago period. Sales were affected because of the drop in offtake by members of trade on account of VAT-related concerns. Such a trend is also likely to manifest in the quarter under progress; it should get smoothened out subsequently. Well-known brands such as Becosules, Corex, Gelusil and Benadryl form part of Pfizer's product portfolio.

In spite of the drop in sales, the operating margins have been north-bound, courtesy Pfizer's restructuring initiatives. In the latest quarter, margins have improved by five percentage points to 20.4 per cent. The scaling up of margins can be attributed to a sharp focus on cost management; raw material costs, as a percentage of revenues, have seen a more than six-percentage-point decline. The trending up of margins is expected to continue, as the complete benefits of the restructuring exercise kick in.

Adjusting for extraordinary expenses that pertain to the amortisation of VRS expenses, earnings for the quarter at Rs 19 crore grew 25 per cent quarter-on-quarter.

Pfizer is targeting a double-digit topline growth this fiscal; product launches are expected over the next couple of years, though they may not enjoy patent protection. Given the quality of its field force, Pfizer is also looking at in-licensing products from pharma players that do not have a footprint in India.

Gelusil, one of Pfizer's key brands, should also play a part in aiding topline growth this fiscal as its sales are back on track; last fiscal, Pfizer lost sales on Gelusil, as it recalled stocks of the product from the market.

Pfizer is also set to take advantage of the new product patent regime by launching products from its parent's portfolio after about three-four years. Though the revenue opportunity from such launches is difficult to quantify, it would be interesting to see whether they happen through the listed entity or through one of the two unlisted subsidiaries in India that are fully owned by Pfizer Inc.

Though the current valuation is rich, Pfizer's restructuring initiatives should ensure that the level is sustained.

News flow on possible product launches and tie-ups should be evaluated before considering an entry into the stock. Staying invested appears to be an appropriate course of action now.

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Mutual fund performance — Braving a bumpy market

Copyright © 2005, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line