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Expect some moderation in growth in domestic market on large base
We expect Glenmark to report 17% y-y growth in domestic formulation sales. This is
slower than ~20% growth recorded in the past two quarters. Our projection is in line with
management guidance of a slowdown in 2HFY12. The slowdown is expected on back of
very high base of 29.7% growth recorded in 3QFY11. However, AIOCD AWACS data
suggests strong growth of 22.2% and 28.6%, respectively, in October and November
2011.
US growth likely to remain strong on back of new launches, currency depreciation
We expect GNP to continue to record strong sales growth in the US on the back of new
launches. Some of the key launches in the recent past include Malarone, Levocetirizine,
Felodipine and oral contraceptives (OCs). Malarone is launched under exclusivity and
there are no authorized generics at this stage. There is unlikely to be any additional
competition in the foreseeable future, in our view. Glenmark has already gained 78%
market share in this product and a full quarter impact will be realised in the current
quarter. We are factoring in 67% growth rate in the US.
We keep EBITDA margin ex licensing income at 2QFY12 levels
Malarone contribution and currency depreciation should assist expansion of core
EBITDA margins (ex licensing income). However, this may be negated by higher costs,
particularly an increase in R&D expenditure. We note that the management has slightly
reduced core EBITDA margin guidance to 21-22% for FY12 from 22-23% earlier. For
3QFY12, we project core EBITDA margin at 20.7% compared to 20.5% in 2QFY12.
During the quarter, we estimate that Glenmark will book USD5mn in licensing fees
related to the successful completion of Phase I trials for GRC 15300. We also factor in
INR850mn in forex loss on forex loans, similar to what was reported in the previous
quarter.
We note that y-y numbers are not comparable as 3QFY11 financials were in Indian
GAAP and 3QFY12 financials are projected as per IFRS.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� �
Expect some moderation in growth in domestic market on large base
We expect Glenmark to report 17% y-y growth in domestic formulation sales. This is
slower than ~20% growth recorded in the past two quarters. Our projection is in line with
management guidance of a slowdown in 2HFY12. The slowdown is expected on back of
very high base of 29.7% growth recorded in 3QFY11. However, AIOCD AWACS data
suggests strong growth of 22.2% and 28.6%, respectively, in October and November
2011.
US growth likely to remain strong on back of new launches, currency depreciation
We expect GNP to continue to record strong sales growth in the US on the back of new
launches. Some of the key launches in the recent past include Malarone, Levocetirizine,
Felodipine and oral contraceptives (OCs). Malarone is launched under exclusivity and
there are no authorized generics at this stage. There is unlikely to be any additional
competition in the foreseeable future, in our view. Glenmark has already gained 78%
market share in this product and a full quarter impact will be realised in the current
quarter. We are factoring in 67% growth rate in the US.
We keep EBITDA margin ex licensing income at 2QFY12 levels
Malarone contribution and currency depreciation should assist expansion of core
EBITDA margins (ex licensing income). However, this may be negated by higher costs,
particularly an increase in R&D expenditure. We note that the management has slightly
reduced core EBITDA margin guidance to 21-22% for FY12 from 22-23% earlier. For
3QFY12, we project core EBITDA margin at 20.7% compared to 20.5% in 2QFY12.
During the quarter, we estimate that Glenmark will book USD5mn in licensing fees
related to the successful completion of Phase I trials for GRC 15300. We also factor in
INR850mn in forex loss on forex loans, similar to what was reported in the previous
quarter.
We note that y-y numbers are not comparable as 3QFY11 financials were in Indian
GAAP and 3QFY12 financials are projected as per IFRS.
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