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Research
Glaxo SK Pharma - Growth driven by vaccines and derma products - Centrum
Posted On : 2012-08-17 20:10:30( TIMEZONE : IST )
Glaxo SK Pharma's (GSK) results for Q2CY12 were in line with our expectations. The company reported 15%YoY growth in revenues, 260bps decline in EBIDTA margin and 14%YoY growth in net profit. The growth was driven by vaccines and derma segments, which grew by ~25% each. GSK is a debt-free company with cash/share of Rs201. We expect the growth momentum to be maintained due to good growth from new products introduction. We have a Buy rating for the scrip with a target price of Rs2,479 (based on 24x CY13E EPS of Rs103.3).
Strong growth in core business: GSK reported 15%YoY growth in revenues from Rs5.74bn to Rs6.62bn due to 16.3% growth in its core business. The company's vaccines and dermatology segments grew by ~25% each and are expected to grow further due to new products introduction.
Margin declined due to currency effect: GSK's EBIDTA margin declined by 260bps YoY from 34.7% to 32.1% due to sharp rise in the material cost. The company's material cost increased by 500bps from 35.9% to 40.9% of revenues due to the rise in imported raw material cost and depreciating rupee. GSK's personnel cost declined by 160bps from 13.5% to 11.9% due to higher sales growth. Other expenses declined by 80bps from 15.8% to 15.0% of revenues.
Strong growth in vaccines and derma segments: GSK reported strong growth of ~25% each in the vaccines and derma segments. The company markets well-known brands Betnesol, Betnovate-C, Betnovate-N and Neosporin in the derma segment.
Major brands growing well: As per IMS MAT-June'12 data, GSK's major brands reported good growth namely: Augmentin 17.4%, Calpol 13.9%, Betnovate-C 14.9%, Betnovate-N 16.1% and Eltroxin 16.8%. These brands are likely to drive future growth.
New product introduction: GSK launched the following new products during the quarter: Uricostat for gout, Hycamtin for advanced cancer, Seretide metered dose inhaler (MDI) and Volibris for pulmonary hypertension. These products are likely to become future growth drivers.
Valuations: We expect GSK to report EPS of Rs87.6 for CY12 and Rs103.3 for CY13. At the CMP of Rs2,100, the stock trades at 24.0x CY12 and 20.3x CY13 earnings. We have a Buy rating for the scrip with a target price of Rs2,479 (based on 24x CY13E EPS of Rs103.3) with 18.0% upside over CMP.
