Angel Broking neutral on GlaxoSmithKline Pharma

“GlaxoSmithKline Pharma (Glaxo) reported its 2QCY2011 results, which were mostly in-line with our estimates on the top-line and PAT level. However, the company’s OPM came in lower than our expectation at 33.2% (estimated 34.7%). We remain Neutral on the stock. Glaxo reported net sales of Rs 560cr (Rs 498cr), up 12.5% yoy, in-line with our estimates of Rs 563cr. Gross margin at 63.2% was mostly in-line with our expectations; however, OPM at 33.2% (36.5%) was below our estimate of 34.7%. The company reported net profit of Rs 148cr (Rs 129cr), growth of 14.4% yoy. This was broadly in-line with our expectation of Rs 154.4cr. The company reported net profit growth on the back of higher-than-expected other income, despite lower-than-expected OPM.”

“We expect net sales to post a 13.9% CAGR to Rs 2,788cr and EPS to register a 14.6% CAGR to Rs 86.9 over CY2010–12E. At current levels, the stock is trading at 29.5x and 24.4x CY2011E and CY2012E earnings, respectively. We maintain our estimates and, hence, remain Neutral on the stock,” says Angel Broking research report.

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