Sharekhan recommended hold rating on Glenmark Pharmaceuticals with a target price of Rs 730 in its research report dated November 03, 2017.
Sharekhan's research report on Glenmark Pharmaceuticals
Glenmark Pharmaceuticals (Glenmark Pharma) revenue grew 1.5% y-o-y to Rs. 2,256.6 crore for Q2FY18, while operating profit declined by 13.5% to Rs. 388.4 crore. Adjusted profit declined 4.2% to Rs. 214.2 crore. The weak performance was on account of a 5.7% decline in US business and a 21.7% drop in Latin America (LatAm) business. The US business is witnessing pricing pressure to the tune of 13% (versus 10-12% earlier). Moreover, raw material cost increased 22.2%, while staff cost rose 15.5% (owing to increments and bonuses given to employees), leading to a sharp fall in operating profit. However, a lower tax rate of 21.6% (versus 29.1% y-o-y) restricted the decline in adjusted profit to 4.2%.
Taking into account the management’s cautious outlook, post a weak quarterly performance, we reduce our sales and earnings estimates by 4% /4% and 21.8%/15% for FY2018/ FY2019, respectively. We maintain our Hold rating and revise our PT downward to Rs. 730, valuing the stock at 15x FY2019 earnings.
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