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Market outlook and stock tip:-Wockhardt Ltd
Saturday, July 30, 2011
Medium term target:640
Long term target:1080(200% for a period of 12-15 months)
Story:Wockhardt is a high technology global pharmaceuticals and biotechnology major with innovative multi-disciplinary research and development programmes.It has 5 research centres and 21 world-class manufacturing plants in India, USA, UK, France and Ireland. Wockhardt has a multi-ethnic workforce of over 6500 people from 14 different nationalities.Wockhardt has presence in formulations,nutritional products and bulk drugs.Majority of its revenues come from the international markets.The company has been a great performer barring the last few years when it got saddled with debts.The company finally made a turnaround with 90crs of consolidated profit for fiscal fy10-11.The debt issue is still lingering with its FCCB holders where the company owes 440crs,hearing being on 1st of august.According to the market speculation the same should get settled this time around which would rerate the stock bigtime.The company overall is still having 3000crs of debts in book(including to the bond holders)but it has come up with a solid restructuring plan.Under recent corporate debt restructuring measures, the company has been given a few more years to payback its debt to the secured lenders, who account for almost 90% of its debt.Another big positive trigger for the stock can be its nutrition division where its in advanced stage of selling the business to either danone or abbot for a massive 1350crs.Once the deal happens wockhardt would have a new lease of life with debt being under control helping it to boost its margins.The company really shocked me with its 4th quarter results where it came out with nearly 940crs of sales and 162crs consolidated profit after tax.Even assuming nil growth quarter on quarter for the coming four quarters we get a Profit figure of 650crs for fy11-12.That results in an earning per share of 60rs.Topline pharma companies like lupin,ranbaxy,sun pharma quotes at 20 times plus forward.Wockhardt is massively undervalued with a strong business and great potential forward.Lupin has a marketcap of 20000crs,ranbaxy attracts 23000crs,sun pharma a slightly bigger one has a 50000crs+ marketcap as on last closing(wockhardt on the other hand trades at less than 5000crs marketcap).I have no clue on monday's court hearing but even if we forget that chapter wockhardt has a robust future.To me its fair value is above 1000 rs(have assigned a target of 1080rs) and the same should be achieved within the next 4-5 quarters.At 375 bucks its a massive steal.Be it for short or long term the company should rock and give a huge northward jerk to your portfolio.Altogether a gem of a buy at present levels.
Todays update:In just a matter of 1 year, the company has hit the 200% return target of 1080 rs and looks good for even more.From 375 bucks to 1080 rs in just a matter of 12 months.Enjoy the ride members.
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