Buy Glenmark Pharmaceuticals - Elara Capital

• Rating : Buy
• Target Price : INR331
• Upside : 22%
• CMP : INR271 (as on 28 May 2010)

Regaining grip on major markets

US shows sign of old glory

Glenmark's sales in the US have gone up by 19% YoY to INR1.8bn in Q4FY10 on the back of new launches. The company's strategy of building a pipeline for the US market shows promising signs of growth and sustainability for the next 3-4 years. Glenmark has entered the oral contraceptive (OCs) segment with its first ANDA approval among Indian companies, and has another 17 products, waiting in the pipeline in next three years. Partnership strategy for the US market is being actively explored as Glenmark has already tied up with market leader, Taro Pharmaceuticals for selling key dermatological products there.

Domestic growth thrives, LatAm back on track

Glermark has seen a sales growth of 35% YoY in Q4FY10 in the domestic formulation business through robust sales in new brands, Telma and Telma H as well as the expansion of old brands Candid, Candid—B, and Ascoril into new territories. The management expects domestic sales growth to continue at 30-35% while sustaining the specialty business at an overall growth of 25% YoY in FY11. With new brand launches and initiatives in the oncology generics, Gelnmark's LatAm business is poised to grow in FY11. The company has achieved a 29% YoY sales growth in LatAm region and we believe that its lower base in LatAm and semi-regulatory markets would also aid a better growth in FY11.

Strong signs of recovery, maintain Buy

With a significant reduction in receivable days and a sharp drop in the D/E ratio, earnings quality of Gelnmark has gone up significantly. The company shows strong signs of an incisive rebound in sales in key markets. New capacities in Sikkim and Indore along with a foray into inhaler business would drive the high domestic growth in FY11. With positive signs of a recovery all around, we maintain Buy.

Source : Equity Bulls

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