Macquarie stays neutral on Wockhardt after arm gets USFDA warning letter


Mumbai: Macquarie has maintained neutral rating on Wockhardt with a target price of Rs 740 after the company’s step down subsidiary Morton Grove received a warning letter from the US Food and Drug Administration.

The brokerage firm said that while the warning letter will not impact its earnings estimates, it is certainly a setback to the company’s ongoing remediation programs across its facilities.

Macquarie estimates that around 13% of Wockhardt’s overall estimated FY17 sales will be from Morton Grove.

Wockhardt’s plants in Waluj, Chikalthana and Ankleshwar continue to be under the import alert.

“While we remain bullish on the long-term fundamentals of the company, multiples could be under pressure in the near term, driven by uncertainty around remediation timelines. Shift in timelines has significant sensitivity to earnings as fixed costs still remain and WPL continues to invest aggressively in R&D (research and development) to build the US pipeline,” said Macquarie.

Macquarie said that if the warning letter to Morton Grove escalates into an import alert, existing sales could also be at risk. However, an escalation to an import alert is looking unlikely, added Macquarie.