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Glenmark Pharmaceuticals Ltd. | Q4FY13 Concall Update




IndiaNivesh Securities Pvt Ltd


08 May 2013





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Glenmark Pharmaceuticals Ltd. | Q4FY13 Concall Update Company’s revenue grew 25.3% y-o- y (almost flat sequentially) to Rs 13.35 billion, inline with our estimates (INSPL est= Rs 13.32 billion). On account of favorable revenue mix during the quarter, there was substantial (~1000 bps y-o-y & 690bps q-o-q) improvement in Gross margins. Adjusting for forex loss of Rs 250 million in Q4FY13 V/s forex gain of Rs 350 million in Q4FY12, EBITDA grew ~50% y-o y to Rs 2.79 billion, slightly above our estimates ( INSPL est= Rs 2.59 billion). Despite substantial expansion in Gross margins, EBITDA margins increased only 340 bps y-o-y (& 90 bps q-o-q) to 20.9% level (V/s INSPL est= 19.4%) mainly due to higher other expenditure linked with OTC marketing expenses in Russia. Due to lower tax rate of only 2.6% in Q4FY13, company’s net profit (adj for out-licensing income & forex loss) was ahead of our estimates & grew 66.3% y-o- y (20.2% q-o-q) to Rs 1.92 billion in Q4FY13, (V/s INSPL est= Rs 1.47 billion). Outlook & Valuations: Considering the revenue growth of the company in the last 4-5 quarters and ramp up in US business, we are of the view that company would carry same growth momentum going forward. US market is likely to slow down due in FY14 due to delay in approvals & limited opportunities, however we see healthy ramp up in FY15-16E given filings status of the company in the last two years. We expect company to clock core business revenue CAGR of 18.5% during FY13-FY15E to post revenue of Rs 70.66 billion in FY15E. Net profit is expected to grow above 21% CAGR over the same period to report PAT of Rs 8.89 billion in FY15E. We expect company to Report adj EPS of Rs 26.3 in FY14E & Rs 36.9 in FY15E. At CMP of Rs 525, the stock is trading at P/E multiple of 20.1x & 16.1x of FY14E & FY15E earnings estimates respectively. By rolling over P/E multiple of 19x from FY14E to FY15E, we upgrade target price from Rs 506 to Rs 622 & upgrade rating from hold to BUY.

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