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Showing posts with label Value Buy. Show all posts
Showing posts with label Value Buy. Show all posts

Monday, October 29, 2007

Novartis India - Value Buy

Novartis India is a 51 per cent subsidiary of Swiss giant Novartis, One of world`s leading pharmaceutical and consumer health company. Novartis main businesses in India include pharmaceutical (70%), Animal Health (7%), Generics(8%) and OTC(15%).

Novartis pharmaceutical segment includes therapeutic medicines like hypertension, anti inflammatory and anti fungal. Generic segment includes gynaecology and anti-TB. OTC includes vitamins and minerals. Animal health includes drugs for cattle.

Novartis top leading product portfolio includes Voveran, Methergin, Regestrone, PZA Ciba, Otrivin, Calcium Sandoz and others.

Investor with a medium risk appetite can consider investment into this stock with a horizon of 12 months. At the current price of Rs. 336/- the stock trades at 11 times it's 12 month trailing EPS of 30.72. In the current quarter Q2' 07 the company saw a healthy operating margin of 33.64% as compared with a average of 24% in the earlier few quarters. This translated in to around 22% increase in net profit growth q-o-q. This seems to me a surprise number for a company which has been growing at a rate of 10% for the last 5 to 6 quarters.

Betting on current valuation

As of now there is no data available to compute it's forward earnings. But at the current price the stock is availabe at a discount to it's MNC peers. The stock has a target of Rs. 410/- which translates to 14 times it's 12 month trailing EPS on par with it's MNC peers of equal cader.

The company will get a even better re-rating if the current quarter performance continues in the forward earnings.

Fundamentals

1) Excellent product portfolio and diversified business operation
2) Fifth largest MNC pharma in India by profit.
3) Looking for new global brands to be introduced in India, which will increase the topline further.
4) One of the few players in the growing Animal health arena in India.
5) Decent dividend paying company.

Risks

1) Uncertainty about price control regime looms large
2) Changes in regulatory environment e.g. VAT, MRP based Excise, Service Tax etc
3) Evolution and enforcement of Intellectual Property Rights (IPR) in India
4) counterfeiting of Novartis drugs by Indian pharmaceuticals and selling at an cheaper rate.

Posted by Srivatsan 5 comments

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Fundamental Analysis

Fundamental Analysis is the cornerstone of Investing. In fact, some would say that you aren't really investing if you aren't performing fundamental analysis.

During fundamental analysis we look at a stock from three aspects

Company

At the company level, fundamental analysis may involve examination of financial data, management, business concept and competition.

Industry

At the industry level, there might be an examination of supply and demand forces for the products offered.

Economy

Fundamental analysis might focus on economic data to assess the present and future growth of the economy.

To forecast future stock prices, fundamental analysis combines economic, industry, and company analysis to derive a stock's current fair value and forecast future value. If fair value is not equal to the current stock price, fundamental analysts believe that the stock is either over or under valued and the market price will ultimately gravitate towards fair value. Fundamentalists do not heed the advice of the random walkers and believe that markets are weak-form efficient.