Glenmark Pharmaceuticals Ltd(GLEPHA)
By Siddhant Khandekar , Krishna Kiran Konduri
Company Background
We see greater traction coming from the US generic business (constitutes ~27% of sales) on account of ‘at risk’ launch of Abbott’s anti-hypertensive drug Tarka along with two or three new launches in the near future. While Tarka is expected to generate incremental sales in the second quarter and subsequent quarters, the other launches will happen mostly in the third and fourth quarters of the current fiscal.
Valuation
With aggressive generic product launches in the US in the current fiscal and possibly in FY12, we believe the company is well poised to reap the benefits of the changing environment after the assage of the US healthcare bill. The domestic business (~28% of sales) is also growing at a good pace of ~16-17% per annum to complement the overall growth. On the R&D front, we believe there will be some sort of revival after the GRC 15300 deal with Sanofi-Aventis although we are not assigning any value to this at this juncture. We have valued Glenmark’s base business at ~16x FY12E of
` 20.5 with a price target of ` 328.Technical Outlook
A look at the weekly price chart of Glenmark Pharma shows that the share price has been in a sideways consolidation mode since January 2010 till date. In the whole consolidation period, the share price had been largely oscillating between the levels of
` 290-295 on the higher side and `235-240 on the lower side.The price action in the current week has seen the stock registering a strong volume led break-out past the upward sloping resistance trend line, which has been in place since August 2009. Among momentum oscillators, the RSI on the daily/weekly chart remains in a rising trajectory whereas the MACD on the daily chart has generated a positive crossover above the zero line indicating build-up of momentum on the upside.--
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