Quarterly Performance

Net sales for the quarter ended June 2010 increased by only 9% to Rs 497.93 crore due to lower sales from vaccines. Pharmaceuticals business grew by 12% during the quarter. Other operating profit margins increased by 111% to Rs 9.58 crore resulting total income from operations to increase by 10% to Rs 507.51 crore. Operating profit margins expanded by 150 bps to 37.7% resulting operating profit to increase by 14% to Rs 191.25 crore. The increase in the margins is due to improvement in the margins of Pharmaceuticals business. Consumption cost as percentage to sales, net of stock adjustment declined by 340% to 34.4%. The margins would have been better but increase in the employee cost by 120 bps to 12.5% and other expenditure by 10 bps to 15.5% restricted it to 34.4%.

Nil Other income during the quarter compared to Rs 18.00 crore in the corresponding previous period restricted PBIDT growth to 3% at Rs 191.25 crore. Interest income rose by 4% to Rs 20.22 crore and depreciation up by 2% to Rs 4.05 crore led PBT to increase by 3% to Rs 207.42 crore. The dip in the effective tax rate by 180 bps to 32.7% led PAT before EO increase by 6% to Rs 139.61 crore. EO expenses of Rs 10.62 crore pertain to provision made on account of revised gratuity limits and actuarial charge on post-retirement benefits compared to Rs 7.31 crore in the corresponding previous period. Thus, net profit has increase by 4% to Rs 128.99 crore.

Half yearly Performance

Total income from operations increased by 14% to Rs 1054.05 crore for the half year ended June 2010. Operating profit margins rose by 120 bps to 37.6% resulting operating profit to increase by 18% to Rs 396.82 crore. Other income remained flat at Rs 18.00 crore and interest income declined by 11% to Rs 40.56 crore led PBDT to increase by 14% to Rs 455.38 crore. The marginal increase in the depreciation by 2% to Rs 7.81 crore led PBT to increase by 14% to Rs 447.57 crore. The decline in the effective tax rate by 160 bps to 32.8% led PAT before EO to increase by 17% to Rs 300.80 crore. EO expenses of Rs 10.62 crore compared to EO income of Rs 10.53 crore led net profit to increase by 8% to Rs 290.18 crore.

Management Quote

Commenting on the performance during the quarter, Hasit B. Joshipura, Managing Director, said, "The growth momentum continued in the pharmaceutical business with competitive growth in the mass markets, mass specialities and specialities businesses. During the quarter, sales of vaccines were significantly impacted on account of constraints on supply. The availability of vaccines, however, has been improving towards the end of the quarter."

The promoter holding remains unchanged at 50.7% as on 30 June 2010 compared to 31 March 2010.

Valuation

The scrip is quoting at Rs 2075.30. The annualized EPS for half year ended June 2010 is Rs 71 and discounting at 29.2 times.