Pharmacy chain 36.6 has disclosed its financial performance for 1H 2008. The company says that consolidated revenue jumped by over 43%, giving its retail and manufacturing (Veropharm) subdivisions equal credit for sales growth.
Table. Retail chain 36.6: key financials for 1H 2008, USD mn
| Indicator | 1H2007 | 1H2008 | Change 1H2008/1H2007 |
|---|
| Sales | 390.5 | 558.8 | 43% |
| Retail | 302.9 | 448.2 | 48% |
| Veropharm | 59.5 | 86.5 | 45% |
| others | 28.00 | 24.1 | -14% |
| Gross profit | 130.9 | 182.20 | 39% |
| Retail | 83.4 | 114.7 | 38% |
| Veropharm | 36.6 | 58.7 | 60% |
| others | 10.90 | 8.80 | -19% |
| EBITDA | 15 | 9.70 | -35% |
| Retail | -5.1 | -21.2 | -314% |
| Veropharm | 17 | 28.6 | 68% |
| others | 3.10 | 2.20 | -28% |
| Net profit | -16.9 | -8.1 | 52% |
| Retail | -29.6 | -28.8 | 3% |
| Veropharm | 11 | 19.4 | 76% |
| others | 1.70 | 1.30 | -21% |
Source: company data, Finam estimates
The company has changed its development strategy several times to date. In the immediate future, the company's priority tasks will be to make its retail network more efficient by ridding it of non-core assets, boosting the profit margins of its retail subdivision by shutting down some of its loss-making pharmacies and streamlining its logistics network.
In the reporting period, the retail subdivision continued to make losses. A more than 2x reduction in the company's net loss is attributable to a one-off gain of USD 35.5 million from the sale of EMC in May 2008 and rapid growth in the net profit of the manufacturing subdivision.
We believe that the current development trends at the company, as well as its financial results, do not make it an attractive vehicle for investments. However, we deem it necessary to underscore the fundamental factor that, in our view, is insufficiently heeded by the market: the company's 51% stake in Veropharm currently has a market price of USD 200 million, a value that exceeds the company's market capitalization by 5%. This is indicative of the fact that the company's market cap does not include the price of its retail subdivision, which controls more than 1,100 pharmacies. We put this discrepancy down to market vagaries and believe that the company's shares may gain ground in the mid term.
We estimate the fair value of Pharmacy Chain 36.6 shares at USD 34.5 per share, which means an upside potential of more than 80% to its current stock valuations.
0.569
0.073
