Glenmark's 4QFY13 performance was above expectations. Key highlights:
Glenmark's (GNP) net sales grew 25% YoY to INR13.35b (v/s est INR12.93b).
Sales growth was driven by strong growth in domestic formulations (up 32%
YoY) and US generics business (25% YoY, partly led by foreign currency). Sales
were above expectation despite absence of licensing income (est INR243m).
EBITDA grew 44% YoY to INR2.69b (v/s est INR2.88b), with EBITDA margin
expanding 150bp YoY to 20.2% (v/s est 22.3%) on a low base of 4QFY12 (which
was impacted by adverse sales mix). Core EBITDA was up by 47.5% YoY to
INR2.4b v/s est of INR2.35b, with core EBITDA margin at 18.6% (v/s est 19%).
Adj PAT stood at INR1.49b (v/s est INR1.47b), up 11.7% YoY. PAT growth is
lower than EBITDA due to a forex loss of INR150m (INR350m gain in 4QFY12),
but above our estimate due to a lower tax rate at 2.6% (v/s est 12%).
GNP continues to show an improvement in working capital management,
with inventory days down 10 and payable days up 20 days. Cash conversion
cycle has reduced by 10 days, over and above a 45-day improvement in FY12.
Valuation and view: Post 4QFY13 results, we raise EPS estimates by 2%/4% to
reflect (1) healthy top line growth sustaining through FY15E and (2) lower tax
rate but partly offset by increased R&D expenses. We expect GNP to gradually
reduce its D/E from 0.9x in FY13 to ~0.5x by FY15E, with improvement in return
ratios. GNP has differentiated itself among Indian pharmaceutical companies
through its significant success in NCE research (resulting in licensing income of
USD205m till date). Given this success, company has been aggressive to add
new NCEs to its pipeline, which will exert pressure on its operations in shortto-
medium term as it will have to fund R&D expenses for these NCEs. The stock
trades at 19x FY14E and 15.7x FY15E EPS. Maintain Buy with a target price of
INR617 (18x FY15E EPS + INR15 DCF value for Crofelemer and Para-IV upsides).
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Glenmark's (GNP) net sales grew 25% YoY to INR13.35b (v/s est INR12.93b).
Sales growth was driven by strong growth in domestic formulations (up 32%
YoY) and US generics business (25% YoY, partly led by foreign currency). Sales
were above expectation despite absence of licensing income (est INR243m).
EBITDA grew 44% YoY to INR2.69b (v/s est INR2.88b), with EBITDA margin
expanding 150bp YoY to 20.2% (v/s est 22.3%) on a low base of 4QFY12 (which
was impacted by adverse sales mix). Core EBITDA was up by 47.5% YoY to
INR2.4b v/s est of INR2.35b, with core EBITDA margin at 18.6% (v/s est 19%).
Adj PAT stood at INR1.49b (v/s est INR1.47b), up 11.7% YoY. PAT growth is
lower than EBITDA due to a forex loss of INR150m (INR350m gain in 4QFY12),
but above our estimate due to a lower tax rate at 2.6% (v/s est 12%).
GNP continues to show an improvement in working capital management,
with inventory days down 10 and payable days up 20 days. Cash conversion
cycle has reduced by 10 days, over and above a 45-day improvement in FY12.
Valuation and view: Post 4QFY13 results, we raise EPS estimates by 2%/4% to
reflect (1) healthy top line growth sustaining through FY15E and (2) lower tax
rate but partly offset by increased R&D expenses. We expect GNP to gradually
reduce its D/E from 0.9x in FY13 to ~0.5x by FY15E, with improvement in return
ratios. GNP has differentiated itself among Indian pharmaceutical companies
through its significant success in NCE research (resulting in licensing income of
USD205m till date). Given this success, company has been aggressive to add
new NCEs to its pipeline, which will exert pressure on its operations in shortto-
medium term as it will have to fund R&D expenses for these NCEs. The stock
trades at 19x FY14E and 15.7x FY15E EPS. Maintain Buy with a target price of
INR617 (18x FY15E EPS + INR15 DCF value for Crofelemer and Para-IV upsides).
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