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Biofarm First Impression 4Q 2010: Sales growth better than expected, beats the market

Biofarm has released its 4Q 2010 preliminary results under Romanian Accounting Standards. Results were better than we expected with the turnover increasing by 36% yoy at RON 22.5 mn against our estimates of RON 18.5 mn.

Labour expenses and material costs were in line with sales, whereas the company intensified its marketing efforts and thus third party expenses increased significantly. Adjusted with the stock portfolio revaluation, the bottom line came in 33% higher yoy.

Higher than expected turnover: Biofarm posted a solid turnover increase of 36% yoy at RON 22.5 mn, higher compared to our estimates of RON 18.5 mn. The increase was well above pharmaceutical market growth, as according to market research company Cegedim, over 4Q 2010 the market grew by only 4% yoy, with Rx sales as main growth driver. As Biofarm is mainly focused on OTC, turnover rise came as a positive surprise.

The company intensified its marketing efforts: Biofarm reported increasing operational costs, as marketing activities intensified in the last quarter and thus third party expenses rose by 64% yoy to RON 7.1 mn. Other costs items also increased with material costs up by 27% yoy at RON 6.9 mn and labour expenses up 28% yoy at RON 4.3 mn.

Higher operating profit: Helped by the increase in sales, EBIT reached RON 1.7 mn, up 2.5x yoy and double against our forecast. The company reported financial gains of RON 0.6 mn, 93% lower yoy, as the stock portfolio revaluation had a minor contribution compared to last year (RON 0.35 mn vs RON 6 mn in 2009). Thus, the bottom line came in at RON 1.9 mn down 73% yoy, while adjusting it with the stock portfolio revaluation, the net profit stood at RON 1.6 mn, up 33% yoy and 30% higher compared to our estimates.

Outlook and recommendation: We view the results as positive given that sales and the bottom line were above our expectations. We will update our DCF model to include the 4Q developments and we decide to place our recommendation and target price of RON 0.21 under review.

Sursa: http://www.rciro.ro

Tags: market higher expected growth sales biofarm

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