Pfizer India rises on parent’s progress in combating contagion

ET Intelligence Group: Pifzer India’s stock has shown renewed investor interest after its US-based parent announced that it had identified antiviral compounds which might arrest the spread of the novel coronavirus (Covid-19).

If successful, the development may intensify the earnings growth of the Indian subsidiary given its strategy to align the Indian business and portfolio with the global structure.

While the intellectual property may be retained by the parent, Pfizer India may benefit from distribution and manufacturing if it is outsourced, according to some analysts.

The stock has been making new highs on the bourses following higher earnings growth. In the first nine months, Pfizer India’s net profit grew by 27 per cent year-on-year on a sales growth of 6.6 per cent aided by corporate tax cut, growth in high margin brands and reduced focus on low-margin brands.

In the December 2019 quarter, the company’s revenue grew by 4.7 per cent. However, a report by ICICI Securities said that sales of its products grew by18.9 per cent according to AIOCD Pharma Softech AWACS, a subsidiary of the pharmaceutical distribution company AIOCD.

“We believe the difference could be due to some level of channel destocking which would normalise in the coming quarters,” said Vinay Bafna, analyst with ICICI securities in the report.

Analysts expect earnings to grow in double digits from low teens to high teens for the next two years. Though a likely contribution from the new invention to combat Covid-19 may not immediately reflect in the short term, it may support the company’s valuation in the near term.

At Wednesday’s closing price of Rs 4,411.8, the company’s trailing price-earnings (P/E) multiple was 39, which is lower than some of its multinational peers including Abbott India, Novartis, AstraZeneca and Procter & Gamble Hygiene and Health Care, which trade at P/E multiples ranging from 42 to 90.