Novartis India Ltd. reports preliminary financial results for the quarter ended June 30, 2015.
We analyze the earnings along side the following peers of Novartis India Limited – Sanofi India Limited and Pfizer India Ltd. (500674-IN and 500680-IN) that have also reported for this period. Highlights - Summary numbers: Revenues of INR 2,159.90 million, Net Earnings of INR 135.20 million, and Earnings per Share (EPS) of INR 4.23. - Gross margins narrowed from 31.89% to 31.82% compared to the same quarter last year, operating (EBITDA) margins now -3.17% from -4.86%. - Earnings declined although operating margins improved from -5.30% to -3.57%. The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth: 2014-06-302014-09-302014-12-312015-03-312015-06-30Relevant Numbers (Quarterly)Revenues (mil)2020.62278.32130.22023.82159.9Revenue Growth (%YOY) -7.758.92-2.534.846.89Earnings (mil)143.1140.435.4521.1135.2Earnings Growth (%YOY)3.17-69.18-76.76118.22-5.52Net Margin (%)7.086.161.6625.756.26EPS4.48 4.391.1116.34.23Return on Equity (%)5.965.671.4320.815.4Return on Assets (%) 2.854.651.1710.082.61 Access our Ratings and Scores for Novartis India Ltd. Click here to view <http://online.capitalcube.com/#!/stock/IN/BSE INDIA/500672> Market Share Versus Profits [image: Revenues History] [image: Earnings History] 500672-IN <http://online.capitalcube.com/#!/stock/IN/BSE INDIA/500672>‘s change in revenue this quarter compared to the same quarter last year of 6.89% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that 500672-IN <http://online.capitalcube.com/#!/stock/IN/BSE INDIA/500672> is holding onto its market share. Also, for comparison purposes, revenues changed by 6.72% and earnings by -74.05% compared to the immediate last quarter. [image: Revenues Growth Versus Earnings Growth] Earnings Growth Analysis The company’s year-on-year earnings decline was driven by the drop in gross margins from 31.89% to 31.82%. This drop in earnings would have been worse were in not for operational cost control activities, which helped the operating margins (EBITDA margins) improve from -4.86% to -3.17%. For comparison purposes, gross margins were 40.97% and EBITDA margins were 5.99% in the previous period. [image: Gross Margin Versus EBITDA Margin] Gross Margin Trend Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet. [image: Gross Margin History] [image: Working Capital Days History] 500672-IN <http://online.capitalcube.com/#!/stock/IN/BSE INDIA/500672>‘s decline in gross margins were offset by some improvements on the balance sheet. The management of working capital, for example, shows progress. The company’s working capital days have fallen to 363.22 days from 382.67 days for the same period last year. This leads Capital Cube to conclude that the gross margin decline is not altogether bad. [image: Gross Margin Versus Working Capital Days] Margins Despite an overall improvement in operating (EBIT) margins, the company’s earnings fell. EBIT margins went from -5.30% to -3.57%. The decline in earnings appears to be largely because of one-time items. Pretax margins declined from 10.29% to 9.52%. [image: EBIT Margin Versus PreTax Margin] [image: EBIT Margin History] [image: PreTax Margin History] Access our Ratings and Scores for Novartis India Ltd. Click here to view <http://online.capitalcube.com/#!/stock/IN/BSE INDIA/500672> Company Profile Novartis India Ltd. is engaged in the research and development of products to protect and improve health and well-being. The company operates its business through four segments: Pharmaceuticals, Generics, Over-The-Counter and Animal Health. The Pharmaceuticals segment comprises of portfolio of prescription medicines, which are provided to patients through healthcare professionals. Its products include Esosteo, and Macalvit Forte. The Generics segment comprises retail generics and its products like Otrivin Perfect Night. This segment focuses on the therapeutic segments, including anti-TB, anti-DUB, anti-histamines, antibiotics, anti-ulcerants, anti-diabetes and cardiovascular. The Animal Health segment has a presence in the cattle and poultry market segments, which deals in products such as Comsho, Oestrushot, Panrely. The Over-The-Counter segment is mainly in the vitamins, minerals, nutritional supplements and cough, cold and allergy market segments. Novartis India was founded on December 13, 1947 and is headquartered in Mumbai, India. CapitalCube <http://online.capitalcube.com/> does not own any shares in the stocks mentioned and focuses solely on providing unique fundamental research and analysis on approximately 50,000 stocks and ETFs globally. Try any of our analysis, screener or portfolio premium services free for 7 days. 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