Reviews
In this edition, we have reviewed Pfizer Limited. and Escorts Limited. We suggest our reader-investors to HOLD in Pfizer Limited and Escorts Limited
We had previously recommended Pfizer Limited in Volume No. 35, Issue No. 12 under the ‘Special Report’ segment. The recommended price for the stock was Rs4,970.25. We had recommended the stock on the basis of predicted growth trend in the pharmaceutical sector. Pfizer is a pharmaceutical company which develops and produces medicines and vaccines for immunology, oncology, cardiology, endocrinology and neurology. Looking at the financial performance of the company, on a standalone quarterly basis the net sales and other operating income were Rs593.49 crore in Q3FY21 as compared to Rs538.18 crore in Q3FY20, posting an increase of 10.28 per cent. The operating profit increased 10.27 per cent from Rs191.66 crore in Q3FY20 to Rs211.34 crore in Q3FY21.
The net profit inched up by 1.57 per cent in the quarter at Rs141.24 crore in Q3FY21 as compared to Rs139.06 crore in Q3FY20. On the annual front the net sales and operating income rose by 3.37 per cent from Rs2,081.50 crore in FY19 to Rs2,151.65 crore in FY20. The operating profit improved by 3.27 per cent in FY20 as compared to FY19. Net profit on an annual basis increased 18.66 per cent at Rs509.13 crore in FY20 as compared to Rs429.05 crore in FY19.
The medicine spending in India is predicted to rise by 9 to 12 per cent over the next five years, posing India to become one of the top 10 countries in terms of medicine spending. A better growth in domestic sales for the companies will also depend on the capabilities of companies to align their product portfolio towards chronic therapies for diseases which are on the rise. Pfizer has an attractive presence in injectable antibiotics. The company has witnessed a boost in demand for elective surgeries, paving the way for revival in demand for anti-infective injectable drugs. Hence, we recommend HOLD.
We had previously recommended Escorts Limited in Volume No. 36, Issue No. 01 under the ‘Choice Scrip’ segment. The recommended price for the stock was Rs1,417.70. Our recommendation was on the basis of optimistic growth potential of the company in the automobile sector. Headquartered in Faridabad, Escorts Limited is an Indian multinational conglomerate and automotive engineering company which operates in the sectors of agricultural machinery, construction machinery, material handling and railway equipment. On a consolidated quarterly basis, the company’s net sales and other operating income were Rs2,228.75 crore in Q4FY21 as compared to Rs1,385.65 crore in Q4FY20, posting an increase of 60.85 per cent. The operating profit rose significantly by 81.63 per cent from Rs212.37 crore in Q4FY20 to Rs385.73 crore in Q4FY21. Its net profit surged up significantly in the quarter being at Rs270.65 crore in Q4FY21 as compared to net profit of Rs129.22 crore in Q4FY20. On the annual front the net sales and operating income rose by 7.22 per cent from Rs5,810.09 crore in FY20 to Rs7,014.42 crore in FY21. The operating profit jumped by 69.36 per cent in FY21 as compared to FY20. Net profit on an annual basis surged up by 84.51 per cent recording at Rs872.37 crore in FY21 as compared to Rs472.80 crore in FY20.
Escorts specialises in the manufacture of tractors, the exports of which from India are expected to grow by CAGR 6-8 per cent with volumes of 8,000-10,000 by 2022. The company reported domestic tractor sales in March 2021 at 11,730 tractors registering a growth of 124.4 percent against 5,228 tractors in March 2020. The tractor demand is expected to continue to be strong led by higher Rabi output, favorable crop prices, and initial positive forecast of 2021 monsoon season. Hence, we recommend HOLD.
(Closing price as of May 18, 2021)