Accumulate Wockhardt stock for long-term, solid gains

Wockhardt is a global pharmaceutical and biotechnology organisation providing affordable high quality medicines across the world. It has 14 comprehensive manufacturing facilities across India, US and Europe which are approved US FDA, UK MHRA and EAMA compliant sites. Wockhardt has a global footprint with 75% of its business outside India. It is present in various segments like generics, biotechnology, injectable and antibiotic discovery. Wockhardt is focusing in 4 areas of business to be the strategic pillars for future growth. First is the pharmaceutical business in UK, India, US and emerging markets. Second is the manufacture of vaccine in UK under collaboration with Serum Institute to supply it globally. Third is the entire injectable insulin portfolio in the diabetes Biologcal space. Lastly is the deep commitment of the company in the research and development space for new drug discovery. The company has done an entire restructuring in its US business by closing down its manufacturing facility in Morton Grove in Chicago, USA, which was a significant drain on its financial performance. Wockhardt expects to save about USD 12 million in losses which it was incurring. But the company has identified the product portfolio to be now manufactured by a third party at a certified facility and will continue to maintain the sale of the product with approx 40% gross margin. The company has also recently concluded an agreement with Serum Institute to manufacture 150 million doses per year of vaccine at its UK facility for a period of 15 years and for which it has received £10 million contribution. Additionally, apart from the contract manufacturing there is a joint venture component in the agreement wherein there will be a profit sharing of 51:49, in favour of Wockhardt. The company has a significant presence in the antibiotic segment and is among the largest company in the world to have a comprehensive end to end discovery and development program. The deleveraging undertaken by the company over the last five years have resulted in the long term external debt going down from Rs 3,200 crore to about Rs 600 crore. In terms of its external debt to equity, it has gone down from 0.96 to 0.16. The promoters have also been fully committed to the company by pumping in over Rs 700 crore in additional funds for future growth of the company which is an extremely good sign. The Wockhardt stock has been in a downturn over the last few years due to high debt and falling sales. But now with external debt restructuring, fresh capital infusion and new contract agreements the company is poised to do well over the next few years. There is a new vision and energy in the company during the last one year and this should propel the Wockhardt to newer heights. The Wockhardt stock quoting at Rs 176 on the bourses can be accumulated by portfolio investors for long term solid gains. It has the potential to become a multibagger. But investors can do their own due diligence, assess their risk appetite and check with their financial advisor before buying any stock recommendation.
Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.