Feb 21, 2013, 03.10 PM IST | Source: Moneycontrol.com

Accumulate GlaxoSmithKline; target of Rs 3900: Emkay

Emkay Global Financial Services is bullish on GlaxoSmithKline Consumer Healthcare and has recommended accumulate rating on the stock with a target of Rs 3900 in its February 18, 2013 research report.

Emkay Global Financial Services is bullish on GlaxoSmithKline Consumer Healthcare and has recommended accumulate rating on the stock with a target of Rs 3900 in its February 18, 2013 research report.

“GlaxoSmithKline Consumer’s, Q4CY12 performance was ahead of expectation on revenue front, but below estimates at the APAT level. 1) Revenues at Rs 7.1bn, up 18percent yoy; the underlying volume growth is ~ 7percent yoy. 2) Gross margins expanded 160bps yoy to 66percent led by price increases 3) EBIDTA at Rs 764mn, down 3.3percent yoy; EBIDTA margins declined 300bps yoy to 7.2percent owing to higher employee cost and other expenses. 4) APAT growth at 18percent yoy to Rs 697mn owing to higher auxiliary income and lower interest outgo.”

“The underlying volume growth recorded for the quarter stood at circa 7percent against our expectations of 4percent. We believe MFD category (Horlicks & Boost) would have maintained strong growth momentum. There is substantial improvement in growth momentum compared to previous quarters -3.2percent in Q2CY12, 6.0percent in Q3CY12 and 7percent in Q4CY12. Despite gross margin expansion of 160bps yoy and A&P spends retained at 19percent of revenues, Ebidta performance was impacted. The Ebidta margins declined 300bps yoy to 7.2percent vs our expectation of 10.6percent for the quarter. Consequently, Ebidta declined 3percent yoy to Rs764 mn in the quarter.”

“The key arguments for GSK remains intact (1) strong MFD portfolio, (2) new launches, (3) increase presence in North and West Indian, (4) increase in share of its non-MFD segment and (5) focus on rural distribution expansion. Strong brand image of Horlicks with its pricing capability is reassuring. Maintain ‘accumulate’ with target price of Rs 3900/share,” says Emkay Global Financial Services research report.

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