According to the press release published Monday, Veropharm's first-half sales surged 31.7% to $59.50 mln. Under the Federal Reimbursement Program the company's sales totaled $2.1 mln. It should be noted that in January-June 2007 earnings derived in the Rx drugs segment grew at a faster pace (up some 40%), while the proportion of this segment in the company's sales mix rose from 51% to 54.2% in H107. Furthermore, the company achieved strong improvements in the conventional medicine segment amid a reduction in production volumes, while these products still enjoy stable market demand.
Table 1. Veropharm's headline financials for H107, $mln
| | H106 | H107 | Chng, y-o-y |
| Sales |
45.2 |
59.5 |
31.7% |
| COGS |
17.4 |
22.9 |
31.3% |
| Gross profit |
27.8 |
36.6 |
32.0% |
| Gross margin |
61.4% |
61.5% |
|
| S&A costs |
16.86 |
21.47 |
27.3% |
| EBITDA |
12.1 |
17.0 |
41.0% |
| EBITDA margin |
26.7% |
28.6% |
|
| Net profit |
7.5 |
11.0 |
47.9% |
| Net margin |
16.5% |
18.5% |
|
Source: Company data, Finam estimates
The rise in COGS in the first six months of 2007 was equal to that in sales, which left first-half gross margin largely unchanged (61.5%). Veropharm's gross margin was also negatively influenced by a 2.5% reduction in its gross margin figures in its core business segments. The only exception was the conventional medicine segment where gross margin grew more than 8% to 40.1%.
Efficient opex control allowed Veropharm to boost EBITDA by a hefty 41%, as a result of which EBITDA margin came in at 28.6%. H107 net profit surged 47.9% to $11 mln.
By and large, we are upbeat about strong improvements in the company's sales and also margins compared to January-June 2006 despite much slower growth in net profit against our forecasts.
Notwithstanding a number of positive factors that sharpen the company's investment appeal, including Veropharm's plans to offer new drugs to the market and efficient efforts to optimize its production facilities to comply with GMP standards, we do not expect Veropharm's equities to rally in the mid term.
According to our estimates, the fair price of Veropharm stocks is approximately $38.50 per share.
0.244
0.616
