30 October 2010
Glenmark -Turning around in style :: Centrum,
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Turning around in style
Glenmark Q2 results were largely in-line with our
estimates with healthy growth in all its major markets.
Our bullish stance on its turnaround story seems
justified, and we maintain our BUY rating.
Growth across markets boosts topline– Net Sales
grew 22.7% YoY to Rs7.2bn, slightly higher than our
estimate of Rs7bn. This was aided by healthy growth in
almost all major markets where it is present. It notched a
growth of 26% in US generics (aided by exclusivity for
Tarka sales) and 22% in the domestic business, its two
largest markets. Even the API business grew by 30%,
which was a positive surprise considering the low
growth rates in this segment across the sector.
Margin pressure seen– Higher material costs (due to
Rupee appreciation) and staff expenses due to major
changes in the customer-mix brought down the EBIDTA
margin by 300bps YoY to 23.5%.
Adjusted PAT in-line with estimates – The bottomline,
adjusted for foreign exchange gains of Rs120mn, grew
26.5% YoY to Rs1bn, in-line with our estimates.
Strong product pipeline – With 8 new products set for
launch in the US this fiscal, 13 Para IV FTF opportunities
in the kitty and appreciable progress on the NCE & NBE
portfolio, the product pipeline looks stronger than ever.
Maintain Buy – At the CMP, the stock currently trades
at 20.2x FY11E and 16x FY12E earnings. We maintain
BUY rating on the stock.
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