Centrum Broking
Pfizer (Buy)
CMP: ₹2,765.6
Target: ₹3,320
Key takeaways: a) Revenues grew 13 per cent y-o-y: Pfizer’s revenues grew 13 per cent y-o-y to ₹514 crore from ₹457 crore against industry growth of about 11 per cent in Q3.
We expect Pfizer to report better revenue growth in FY19E, led by the launch of line extensions under the Corex brand and the recent launch of Meronem and Neksium in India.
Pfizer’s EBITDA margin in Q3 grew 430 bps y-o-y to 30.1 per cent from 25.8 per cent due to the decline in material costs and other expenses. Its material costs declined 140 bps y-o-y to 34.4 per cent from 35.8 per cent due to the profitable product mix. Personnel expenses grew 190 bps to 16.3 per cent from 14.4 per cent. Other expenses declined 470 bps to 19.3 per cent from 24.0 per cent. The change in product mix, new product launches and price revision of non-NLEM products would improve Pfizer’s margins going forward, in our view.
Pfizer’s net profit grew 51 per cent y-o-y to ₹131.9 crore mn from ₹87.2 crore due to good sales growth and margin improvement.
Recommendation and risks: We upgrade Pfizer to ‘Buy’ from ‘Hold’ and raise our TP to ₹3,320 (earlier ₹32,980) based on 23x March’21E EPS of ₹144.3, implying upside potential of 24.7 per cent. We also raise FY19E and FY20E EPS by 3 per cent and 4 per cent, respectively.