Glenmark Pharma - Cutting Estimates - Motilal Oswal

GLENMARK 3QFY11: Core performance below est; Adverse geography mix; PAT boosted by forex gains; Cutting estimates

Glenmark's 3QFY11 core performance was below estimates. Core revenues grew by 17.8% YoY to Rs7.28b, core EBITDA increased by 7% YoY to Rs1.5b

Including Tarka, Reported Topline grew by 21.4% to Rs7.51b vs estimate of Rs7.47b. Adjusted PAT grew by only 3.4% YoY to Rs972m (vs est of Rs1.13b).

Revenue growth was led by 33.7% YoY growth for the branded business with India growing by 29.7%, Europe by 27.5%, Latam by 88.4% and RoW by 27.4%.

While management has not disclosed Tarka revenues separately, we estimate that it has contributed ~ Rs224m to the topline.

We expect Glenmark to record 15% topline CAGR for FY10-13 led by 18.8% CAGR in the generic business and 16% CAGR in branded generic business. High net debt of Rs16.68b implies that fund-raising may be needed for de-leveraging the balance sheet (mgmt has indicated that it has no plans for any equity dilution for reducing debt). The stock currently at 23x FY11E, 18x FY12E and 15.2x FY13E earnings. Maintain Neutral with target price of Rs306.

Source : Equity Bulls

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