Wockhardt

Update on the Indian Equity Market:

The Indian indices started the week on a negative note dragged by selling in financials and auto stocks. Nifty closed at 15,824 (-0.2%), dragged by JSWSTEEL (-1.8%), WIPRO (-1.5%), and RELIANCE (-1.5%), The top gainers on the index were SBILIFE (+4.0%), BAJAJFINSV (2.4%), and HINDALCO (+1.9%). Among the sectoral indices, METAL (+0.6%), PHARMA (+0.4%), and MEDIA (+0.3%) led the gainers. REALTY (-1.0%), PSU BANK (-0.8%), and AUTO (-0.6%) were the laggards.

Excerpts of an interview with Mr. Habil Khorakiwala, Chairman, Wockhardt with CNBC TV-18 on 26 July 2021:

• Wockhardt recently posted 1QFY22 earnings. The Company reported a consolidated net loss of ~ Rs 66mn vs a net profit of ~Rs 7598mn in 1QFY21.
• The India business has grown due to its strategy of divesting the acute portfolio vs the chronic portfolio. With a presence in the therapy areas like diabetes, nephrology, and neurosciences. The differentiated strategy for diabetes- affordability, accessibility, and availability has helped them. On a QoQ basis, India business revenue improved from ~Rs 1,200mn to ~Rs 1,520mn.
• There was a YoY growth of 69% in the UK business, and it’s a sustainable business. The UK government is manufacturing the AstraZeneca vaccine at the UK plant of Wockhardt. The vaccine business is expected to be sustainable for the next 1 year and this fill-and-finish business is a highly profitable one.
• The Company’s UK plant received a visit from the UK Prime Minister, the Prince of Wales, and some other ministers. This is because Wockhardt is the only supplier and ~50% of all the UK vaccination has taken place from this facility.
• The Company is in talks with 2 other vaccine manufacturers for fill-and-finish agreements. The Company is also expanding its capacities which are expected to commission early CY22. This business is expected to expand in the years to come.
• Wockhardt would be filing the H14 form for its India facility and inviting the US FDA to visit for an inspection.
• Wockhardt expects to achieve Rs 35bn in terms of topline and maintain the EBITDA margins from the 1QFY22 levels.

Asset Multiplier Comments

• We believe that the company’s strategic plan is to shift from acute therapeutic areas to more chronic businesses like anti-diabetes, CNS (central nervous system), etc., and also to its niche antibiotic portfolio of NCEs (new chemical entities).
• This research focus will likely increase the time to deliver returns to shareholders and also make them unpredictable. The vaccine business could be the savior in the medium term as the volumes may increase shortly.

Consensus Estimate: (Source: NSE)

• The closing price of Wockhardt was ₹ 553/- as of 26-July-2021. The Company reported a loss of ₹ 35.4 per share for the year ended 31^st March 2021.
• The consensus earnings estimate and price target are not available.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”