GlaxoSmithKline Pharmaceuticals - March 2013 Results Preview - Motilal Oswal

- We expect GlaxoSmithKline Pharmaceuticals (GLXO) to post 13% YoY growth in 1QCY13E top line at INR7.03b.

- EBITDA is likely to grow 16.6% YoY to INR2.28b. EBITDA margin would decline 110bp to 32.5%, mainly due to lower raw material costs and other expenses.

- We expect adjusted PAT to record 10.7% YoY growth at INR2.05b in 1QCY13E, and slower EBITDA growth due to lower other income. We believe GLXO is one of the best plays on the IPR regime in India, with aggressive plans to launch new products in the high growth lifestyle segments. Given the high profitability of operations, we expect this growth to lead to sustainable double digit earnings growth and RoE of ~30%. This growth is likely to be funded through miniscule capex and negative net working capital. Company deserves premium valuation due to strong parentage (giving access to large product pipeline), brand building ability and likely positioning in the post patent era. It is one of the few companies with the ability to drive reasonable growth without any major capital requirement, leading to high RoCE of 45-50%. We expect GLXO to record an EPS of INR90.1 (up 13%) for CY13E and INR101.6 (up 13%) for CY14E. Our estimates exclude potential adverse impact of the proposed new pharma policy, which is pending implementation. Based on our current estimates, the stock is valued at 24.1x CY13E and 21.4x CY14E earnings. Maintain Buy.

Source : Equity Bulls

Keywords