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Research
Glenmark Pharma - ICICI Direct
Posted On : 2012-05-11 10:00:38( TIMEZONE : IST )
Growth implied; next task sustainability...
Glenmark reported better than expected Q4FY12 numbers. Revenues grew ~34% YoY and ~3% QoQ to Rs.1066 crore (higher than our expectation of Rs.973 crore), driven by both generics and speciality businesses. The core EBITDA excluding forex gains stood at Rs.187 crore (I-direct estimate: Rs.169 crore) whereas EBITDA margins at 17.5% were almost in line with I-direct estimates. The PAT stood at Rs.150 crore (Idirect estimate: Rs.136 crore). The management has guided for 20-22% revenue growth in FY13. We maintain our BUY rating on the stock.
New product launches, favourable currency strengthen US sales
Sales from the US business grew 53% to Rs.343.5 crore on the back of new product launches and favourable currency. On constant currency, the growth was at 38% YoY. The launch of 180 days exclusivity products for generic Malarone and cutivate and increase in prices of derma products also supported growth. The company launched 12 products in the US market in FY12. It filed 12 ANDAs in FY12 and plans to file another 10-12 ANDAs in FY13.
Inventory rationalisation in domestic formulation completed
After lower growth in Q3FY12 due to inventory rationalisation, sales in the domestic formulation business witnessed strong growth of 24% at Rs.268 crore on the back of new product launches. The inventory rationalisation exercise, which was started in Q2FY12 was completed in Q4FY12 itself. Glenmark is on course to launch 20-25 products in FY13.
Valuation
Glenmark is firing on all cylinders with a focus on niche therapies and incremental launches in those categories. With this kind of growth, the company is well poised to generate sustainable operating cash flows, thus reducing its dependence on the R&D licensing stream. We expect sales, EBITDA and net profit to grow at a CAGR of 16%, 14% and 26%, respectively, in FY12-14E. At the same time, we expect the D/E ratio to come down from 0.84x to 0.42x in FY12-14E. We have valued the stock at 14x FY14E EPS of Rs.26.9 i.e. Rs.377. We maintain our BUY rating.
