Outperform on Wockhardt, target of Rs 1,700

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Published: March 20, 2015 2:00:19 AM

Retain ‘outperform’ on Wockhardt (WPL) with a 12-month price target of Rs 1,700.

Retain ‘outperform’ on Wockhardt (WPL) with a 12-month price target of R1,700. While early L1 inspection is a positive, time-line for its eventual clearance remains key which we believe is at least few quarters away. Current margins of WPL is not reflective of inherent potential of this business given the operating leverage driven by US ramp-up and better asset utilisation.

WPL, on Thursday, announced that US FDA completed a follow-up inspection at Chikalthana Facility (L1) this week, post implementation of the desired GMP remediation by the company (WPL had invited FDA in October 2014). WPL stated that there were no observations related to data security and control measures implemented by them in laboratory and manufacturing.

This is a key facility for WPL as it was the largest contributor to US sales (~$250 million sales) before getting import alert in November 2013.

Early inspection at this facility comes as a positive surprise as we have not built opening up of L1 till FY17e-end. If WPL is able to resolve regulatory issues at this facility by FY16e end this could definitely be a big booster to earnings.

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