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2QCY11 results
GSK India’s net sales growth at 12.4% was reasonably good considering weaker
domestic growth for most Indian pharma names especially those with large
proportion of revenues coming from acute therapy segments. Considering,
company’s focus on expanding in branded generics and enhancing marketing
efforts, margins have come down both at gross and Ebitda levels. This is likely to
sustain as the company added personnel in 1Q. Over coming 3-5 years, we expect
more branded generics launches from the company to boost growth rates from
current below market average rate.
Sales growth reasonably good considering competitive pressures
GSK India’s 2QCY11 sales grew 12.4% YoY with double digit growth in vaccines (14%)
and mass specialty segments. The management earlier guided for growth of 12-14%
approaching market average. Earlier in 1Q, the company introduced branded generics
of J&J’s Ultracet and a sunscreen gel (Ansolar) from Stiefel’s portfolio. In 2Q, it has
launched Votrient and Revolade where it received marketing approvals in previous
quarter. GSK India introduced branded generics in key therapy areas like
cardiovascular, pain management and anti-infectives during CY10. The manufacturing
has been sourced to local Indian players like Hetero drugs for atorvastatin while GSK
focuses on marketing aspect. The company has strengthened its field force to c.
3,000+ now with further addition of sales personnel during 2QCY11 to cater to new
product introductions.
Margins decline on account of aggressive branded generic strategy
GSK’s gross and ebitda margins declined due to branded generic strategy being
followed by the company where the company has been launching products at
aggressive pricing. Ebitda margins declined 308bps to 33.4% led by higher spend on
marketing with staff costs rising by 22% YoY. The margin pressure is likely to continue
for a while as the company plans to continue adding sales force through the year.
However, as the sales force expansion gets in to the base and productivity of newly
hired personnel improves over coming quarters, margins should start improving. Apart
from 5-6 branded generics, some of the innovative products that they intend to launch
during CY11 are Synflorix, Infanrix-Hexa, and dermatology products (Stiefel range).
Rich valuations though potential to enhance growth rates
Over coming years, we expect GSK India should be able to enhance it growth rate to
higher than market average levels if it accelerates launches of branded generic drugs
along with patented and in-licensed products. We, however, maintain U-PF rating
considering rich valuations and believe that market share gains would be gradual and a
lot more effort would be required on enhancing product basket
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
2QCY11 results
GSK India’s net sales growth at 12.4% was reasonably good considering weaker
domestic growth for most Indian pharma names especially those with large
proportion of revenues coming from acute therapy segments. Considering,
company’s focus on expanding in branded generics and enhancing marketing
efforts, margins have come down both at gross and Ebitda levels. This is likely to
sustain as the company added personnel in 1Q. Over coming 3-5 years, we expect
more branded generics launches from the company to boost growth rates from
current below market average rate.
Sales growth reasonably good considering competitive pressures
GSK India’s 2QCY11 sales grew 12.4% YoY with double digit growth in vaccines (14%)
and mass specialty segments. The management earlier guided for growth of 12-14%
approaching market average. Earlier in 1Q, the company introduced branded generics
of J&J’s Ultracet and a sunscreen gel (Ansolar) from Stiefel’s portfolio. In 2Q, it has
launched Votrient and Revolade where it received marketing approvals in previous
quarter. GSK India introduced branded generics in key therapy areas like
cardiovascular, pain management and anti-infectives during CY10. The manufacturing
has been sourced to local Indian players like Hetero drugs for atorvastatin while GSK
focuses on marketing aspect. The company has strengthened its field force to c.
3,000+ now with further addition of sales personnel during 2QCY11 to cater to new
product introductions.
Margins decline on account of aggressive branded generic strategy
GSK’s gross and ebitda margins declined due to branded generic strategy being
followed by the company where the company has been launching products at
aggressive pricing. Ebitda margins declined 308bps to 33.4% led by higher spend on
marketing with staff costs rising by 22% YoY. The margin pressure is likely to continue
for a while as the company plans to continue adding sales force through the year.
However, as the sales force expansion gets in to the base and productivity of newly
hired personnel improves over coming quarters, margins should start improving. Apart
from 5-6 branded generics, some of the innovative products that they intend to launch
during CY11 are Synflorix, Infanrix-Hexa, and dermatology products (Stiefel range).
Rich valuations though potential to enhance growth rates
Over coming years, we expect GSK India should be able to enhance it growth rate to
higher than market average levels if it accelerates launches of branded generic drugs
along with patented and in-licensed products. We, however, maintain U-PF rating
considering rich valuations and believe that market share gains would be gradual and a
lot more effort would be required on enhancing product basket
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