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Pfizer Ltd>
  • CMP : 4,265.4 Chg : 36.70 (0.87%)
  • Target : 4,480.0 (6.90%)
  • Target Period : 12-18 Month

06 Aug 2022

High base effect; focus shifts to digital drives, ex-legacy brands

About The Stock

Pfizer collectively addresses 15 therapy areas in the domestic formulations with a portfolio of over 150 products that include therapeutics & vaccines. The company has been continuously restructuring its portfolio in the last few years to improve the productivity of its core brands.

  • Fourth largest multinational pharma company in India with manufacturing facility in Goa with a run rate of 3.36 billion tablets per annum
  • Top Therapies: VMN, anti-infective, cardiac, gastro and respiratory; Top Brands: Prevenar 13, Becosules, Corex-Dx, Dolonex and Mucaine

Revenue growth was subdued this quarter on a high base of Q1FY22 while numbers have picked up sequentially.

  • Sales declined 21% YoY to ₹ 593 crore (up 8% QoQ)
  • EBITDA de-grew 33% YoY to ₹ 192 crore (up 16% QoQ), while EBITDA margins declined by 578 bps YoY to 32.4% (up 226 bps QoQ)
  • PAT for the quarter was down 15% YoY to ₹ 169 crore (up 34% QoQ)
What should Investors do?

Pfizer’s share price has grown by ~1.4x over the past three years (from ~₹ 2952 in August 2019 to ~₹ 4230 levels in August 2022).

  • Maintain HOLD as we keep watch on growth tempo in brands and implications of the VRS scheme for field force.
Target Price and Valuation

Valued at ₹ 4480 i.e. 30x P/E on FY24E EPS of ₹ 149.3

Key Triggers for future price performance
  • Growth in Power brands, Corex Dx, Minipress XL, Eliquis, Mucaine and Wysolone to offset slowdown in legacy brands, Prevenar 13 and Becosules 
  • Go-to-market transformation strategy by leveraging technology, partnerships with third parties and subject matter experts.
  • Outcome of de-focusing and hiving off tail brands and focusing on core strengths areas such as vaccines, pain management, VMS, GI and CVS
  • Strong brand recall, consistent new product launches, volume growth in top brands and intermittent price hikes provide comfort on the financials front
Alternate Stock Ideas

Apart from Pfizer, among MNC coverage we like Abbott.

  • We continue to believe in Abbott’s strong growth track in power brands and capability in new launches on a fairly consistent basis

Key Financial Summary

Particulars FY19 FY20 FY21 FY22 5 Year CAGR(FY17-FY22) FY23E FY24E 2 Year CAGR (FY22-FY24E)
Revenues 2,081.5 2,151.7 2,238.6 2,611.0 5.8 2,547.8 2,777.1 3.1
EBITDA 565.2 572.6 712.1 835.7 19.1 831.4 930.4 5.5
EBITDA margins (%) 27.2 26.6 31.8 32.0 - 32.6 33.5 -
Net Profit 429.1 509.2 497.6 612.6 24.3 642.5 683.2 5.6
EPS (|) 93.8 111.3 108.8 133.9 - 130.8 149.3 -
PE (x) 46.4 39.1 40.0 32.5 - 29.8 28.1 -
M.Cap/ Revenues (x) 9.6 9.3 8.9 7.6 - 7.5 6.9 -
EV to EBITDA (x) 31.8 30.9 26.4 21.9 - 20.4 17.7 -
RoCE (%) 21.7 18.5 27.6 26.1 - 22.4 21.8 -
ROE (%) 14.2 15.0 20.8 21.4 - 17.9 17.7 -
Source: Company, ICICI Direct Research

Key takeaways of recent quarter & conference call highlights

Q1FY23 Results: Muted performance

  • Pfizer posted de-growth of 21% YoY in topline to | 593 crore. EBITDA margins contracted 578 bps YoY to 32.4% while EBITDA de-grew 33%YoY to | 192 crore. Net profit declined 15% YoY to | 169 crore
  • Revenues were below our expectations. However, growth was also impacted by high base of Q1FY22. Pfizer reported one-off of | 129.8 crore on account of voluntary retirement scheme (VRS) and | 6.5 crore on account of restructuring to drive business transformation in Q1FY23. The company is focussed on direct-to market initiative and implementation of VRS currently, in a strategic shift to post better margins. We continue to believe in Pfizer’s strong growth track record in power brands but despite capability in new launches on a fairly consistent basis, we remain sceptical of Pfizer’s ability to garner volume led growth for new launches in market


Variance Analysis

  Q1FY23 Q1FY22 YoY (%) Q4FY22 QoQ (%)   Comments
Revenue 592.9 749.2 -20.9 549.7 7.9    
Raw Material Expenses 215.9 274.5 -21.4 189.7 13.8    
Employee Expenses 92.2 94.4 -2.3 92.3 -0.1    
Other Expenditure 93.0 94.6 -1.7 102.2 -9.0    
Total Operating Expenditure 401.1 463.4 -13.5 384.2 4.4    
EBITDA 191.9 285.7 -32.9 165.5 16.0    
EBITDA (%) 32.4 38.1 -578 bps 30.1 226 bps    
Interest  3.6 2.3 61.8 3.9 -5.5    
Depreciation 26.5 27.0 -1.8 33.6 -21.1    
Other income 18.0 12.2 47.2 17.1 5.3    
PBT before EO 179.7 268.7 -33.1 145.1 23.9    
Less: Exceptional Items 136.3 0.0 0.0 0.0 0.0   One-off of | 129.85 crore on account of Voluntary Retirement Scheme (VRS) and | 6.48 crore on account of restructuring to drive business transformation in Q1FY23
PBT 43.4 268.7 -83.9 145.1 -70.1    
Tax 10.8 68.8 -84.2 19.3 -43.9    
MI & Share of loss/ (gain) asso. 0.0 0.0 0.0 0.0 0.0    
Adj. Net Profit 168.9 199.9 -15.5 125.8 34.3    

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