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Glenmark Pharmaceuticals
(GLEN.BO / GNP IN)
Balance sheet is better, growth seeing hurdles
Its focus on the core dermatology and respiratory portfolio ensures that
attention is not thinly spread. However, we see the need for some restrategising
in these markets, which could potentially slow down growth
temporarily. The balance sheet improvement seen in the last quarter has
led to some positive sentiment for the stock, while further improvements
should lead to a re-rating.
■
Struggling to turnaround EM business: Glenmark has taken its core
dermatology and respiratory products to the CIS, Latin America, Africa and
Asia-Pacific. Growth has been healthy so far, despite the glitch in FY09: the
FY07-11E CAGR is 21% from these markets. This is, however, not exciting
growth in these fast-growing markets, especially given Glenmark’s low base.
Some of its early strategies do not seem to be outright successes – e.g., the
decision to enter Russia via the smaller cities using price as a strategy
worked initially, but the company ended up getting positioned as a low-end
player. Similarly its Brazil acquisition was not a highly regarded company in
the industry; we believe the overhang is still an issue in the channel.
■
The US and India hold more promise than EM: Glenmark has been
getting approval regularly, though the product basket is small (US$20-25 mn
each). The recent negative jury verdict for Tarka has been viewed quite
negatively and we await for final outcome. India business has been showing
strength with 19% growth in 1H11.
■
Balance sheet improvement could lead to re-rating: Declines in
securitised receivables, receivable days, inventory days and net debt in
1H10 results were the first signs of balance sheet improvement. The stock
could re-rate to 17-18x from 15-16x once it shows further improvements.
■
Valuation: We expect the company to do well over the medium term:
management is astute and agile, and has been building the organisation for
a multi-country operation with sufficient operational freedom for line
managers. However, we see the need for some re-strategising in these
markets, which could potentially slow down growth temporarily.
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
Glenmark Pharmaceuticals
(GLEN.BO / GNP IN)
Balance sheet is better, growth seeing hurdles
Its focus on the core dermatology and respiratory portfolio ensures that
attention is not thinly spread. However, we see the need for some restrategising
in these markets, which could potentially slow down growth
temporarily. The balance sheet improvement seen in the last quarter has
led to some positive sentiment for the stock, while further improvements
should lead to a re-rating.
■
Struggling to turnaround EM business: Glenmark has taken its core
dermatology and respiratory products to the CIS, Latin America, Africa and
Asia-Pacific. Growth has been healthy so far, despite the glitch in FY09: the
FY07-11E CAGR is 21% from these markets. This is, however, not exciting
growth in these fast-growing markets, especially given Glenmark’s low base.
Some of its early strategies do not seem to be outright successes – e.g., the
decision to enter Russia via the smaller cities using price as a strategy
worked initially, but the company ended up getting positioned as a low-end
player. Similarly its Brazil acquisition was not a highly regarded company in
the industry; we believe the overhang is still an issue in the channel.
■
The US and India hold more promise than EM: Glenmark has been
getting approval regularly, though the product basket is small (US$20-25 mn
each). The recent negative jury verdict for Tarka has been viewed quite
negatively and we await for final outcome. India business has been showing
strength with 19% growth in 1H11.
■
Balance sheet improvement could lead to re-rating: Declines in
securitised receivables, receivable days, inventory days and net debt in
1H10 results were the first signs of balance sheet improvement. The stock
could re-rate to 17-18x from 15-16x once it shows further improvements.
■
Valuation: We expect the company to do well over the medium term:
management is astute and agile, and has been building the organisation for
a multi-country operation with sufficient operational freedom for line
managers. However, we see the need for some re-strategising in these
markets, which could potentially slow down growth temporarily.
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