Macquarie maintains 'outperform' rating on Wockhardt

MUMBAI : Macquarie has maintained a 'Outperform' rating on Wockhardt with an increased target price of Rs 1,575. Wockhardt expects total sales to grow by 20% in FY13.

Over the medium term, given the pipeline, Wockhardt expects to sustain double-digit growth and EBITDA margins despite anticipated competition to Toprol-XL.

India is the key market where Wockhardt has doubled its field force over the last two years, to 3,000, and the company expects increasing productivity of the sales force with an established presence across key therapies to drive growth in line to slightly ahead of the market.

While the annual report shows capitalization of Rs 1.72 billion in FY12, we find it worthwhile to note that through the P&L, apart from Rs 750 million revenue R&D expense, an additional Rs 530 million of product development expenses were written off and Rs 440 million of historical capitalized R&D was amortized.

That implies the net impact to capitalization was only Rs 750 million.

R&D as a percent of sales is expected to increase by 50bp to100bp/yr going forward (was 5.3% in FY12).