The strategy now would be to address inefficiencies, free up resources and invest in promising growth markets. Now obviously the reference was to Asia and China and India in particular. Reading between the lines, I believe that this subsidiary of Merck Germany, which has been ignored and not sort of seriously looked at by the parent for so many years now, would see increased attention and renewed investor interest in the coming months and years. So far the financials have not been too good; this company has started growing at a very fast pace recently. The net profit is at Rs 1000 crore on basis of the recent results declared, so we literally are getting a top notch MNC pharmaceutical major at 20 PE. But looking at what the parent has said in the board meeting, three months back, I believe that there should be a renewed interest in this counter in the coming months and years. Financially, this year the company would report about Rs 50 kind of earnings, the stock is at about Rs 780 so it is trading at about 20 times that is reasonable. But if you look this stock from a marketcap to sales perspective, the stock is looking very cheap. If you compare it with Novartis, the turnover is about Rs 873 crore, marketcap is Rs 2,500 crore that is again three times the sales. And if you look at the Pfizer turnover is about Rs 1,900 crore or so and the marketcap is Rs 12,000 crore six times the sales. So Novartis, and Pfizer all these three companies are trading at an average of three to six times the sale. The market cap of Merck should atleast be Rs 1,800 crore whereas the current marketcap is about Rs 1300 crore. So reasonable P/E, decent valuations based on marketcap to sales and renewed interest by the parent company should rerate the stock in the coming years. It is a good long-term stock wherein the risk is very low and the reward could be reasonably good.
The key negative has been low growth since the past many years but I believe the company is breaking out from that ballon and market may take some time to factor that in .
Disclosure: Started buying today in smaller quantities and look to build up on it. Welcome all feedback and views
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