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Glenmark Pharmaceuticals Ltd. | Q3FY14 Result/Concall Update | Better than estimates, maintain BUY




IndiaNivesh Securities Pvt Ltd


27 Jan 2014





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Glenmark Pharmaceuticals Ltd. | Q3FY14 Result/Concall Update Better than estimates, maintain BUY Company’s core revenue grew 20.2% y-o-y (10.3% sequentially) to Rs 16.01bn in Q3FY14, marginally ahead of our estimates (INSPL est= Rs14.75bn) mainly on account of healthy growth across the markets. Adjusting for out-licensing income of Rs 493 mn received in the same quarter previous year, EBITDA grew ~38.7% y-o-y to Rs 3.64bn (V/s INSPL est= Rs 2.96bn) . EBITDA margins increased 300 bps y-o-y (~200 bps q-o-q) to 22.8% level (V/s INSPL est= 20%) due to lower material cost & other expenses partially offset by increase in employee cost. Adjusted net profit (adjusting for out licensing income) grew 35.5% y-o-y (52% q-o-q) to Rs 2.16 bn in Q3FY14, (V/s INSPL est= Rs 1.62bn). Outlook & Valuations: Considering the revenue growth of the company in the last 6-7quarters across the geographies and strong pipeline build-up for US market, we are of the view that company would carry growth momentum going forward. Though uncertainty in ANDA approval from USFDA may hamper its growth, still we remain optimistic due to niche filings and relatively smaller base. As we anticipated US market may report lower growth 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 and half years. Considering higher base in domestic market, we moderated our revenue estimates for FY15E, while we adjusted EBITDA margins estimates by incorporating marginal ~50-100 bps expansion every year linked with improving operating leverage. At CMP of Rs 538, the stock is trading at P/E multiple of 19.8x & 15.3x of FY14E & FY15E earnings estimates respectively. We maintain BUY rating on the stock with the target price of Rs 636. (Valuing at ~18x of FY15E).

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