I have been looking at some Pharma names recently. Let me put a disclaimer upfront. I am not very good at analyzing pharma companies. I am not able to differentiate between most of the companies who sell non-patented generic drugs in India.
Having said that, the numbers for Merck looked good. Below is a glimpse. For more detailed look, please check http://www.screener.in/company/?q=500126
Market Cap: Rs. 1050 Cr
Current Price: Rs. 630.00
Book Value: Rs. 291.36
Stock P/E: 13.34
Debt to equity: 0.00
Price to book value: 2.16
Promoter Holding - 51.8%
Merck Limited was set up in India as Merckâs first Asian subsidiary in 1967. The Company operates both its pharmaceuticals & chemicals businesses in the country.
Dec’13 (Q4) quarter net profits & EPS have gone up by 58%; Revenues are up 31.8%
FY12 (year ending Dec) EPS is 47.2 vs 38.4 in Fy11 (Gain of 23%)
Large part of the company’s revenues comes from areas under govt price control, ability to pass on input cost escalations is not there. This can severely impact margins.
Company has a performance materials division which makes pigments and cosmetic actives, neither of which is core to the company’s business.
The company is likely to post a FY13 (Dec) EPS of close to 53-54. At 15 times, the stock can trade at around 800 levels, which is about 25% from current levels. So, not a screaming buy, but something worth looking into for stability and moderate returns over the short term.