Aventis Pharma –Reduce- Angel Securities
Aventis Pharma (Aventis) announced its 1QCY2010 results which were below our expectation. Net Sales came in at Rs251.4 crore up 9.8% driven by domestic sales, which grew by 11.1% to Rs197.2cr (Rs 177.5cr) (excluding Rabipur, domestic sales growth came in at 21.7%); however, export sales de-grew by 5.9% to Rs54.2 crore.
On the Operating front, Aventis reported OPM of 14.5% (17.0%), which contracted by 250bp on back of higher Employee expenses and lower Gross Margins. The company reported net profit of Rs36.1 crore, down 10.9% on back of OPM contraction and lower other income.
The company has indicated that it would incur planned expenditure in CY2010 on two of its projects: ‘Prayas’- a high quality low cost rural initiative for rural penetration, and entering the OTC market, which would lead to future growth. At Rs1,821, the stock is trading at 22.5x CY2010E and 19.8x CY2011E earnings. Given the rich valuations, we recommend a REDUCE on the stock, with a target price of Rs1,658.
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