Nov 05, 2012, 09.00 AM | Source: Moneycontrol.com
FinQuest Securities is bullish on Glenmark Pharma (GNP) and has recommended buy rating on the stock with a target of Rs 480 in its November 5, 2012 research report.
, FinQuest Securities |
“GNP reported an excellent 34% Y-o-Y increase in sales at Rs. 12,552 mn beating the street estimates by 8% and our estimates by 8%. The strong set of results was due to outperformance in the US (majorly due to increase in base business by increase in market share in major of the products) and in Indian markets. We believe the major drivers for the stock going ahead would be positive data on its NCE pipeline (any out-licensing deal/ movement of pipeline products in development).”
“GNP reported core EBIDTA margins (Ex. Licensing & forex) in Q2FY13 at 20.4% which was lower by 70bps Q-o-Q and 10 bps Y-o-Y whereas the core EBIDTA was 13%/9.5% higher than ours as well as consensus estimate respectively at Rs.2,560 mn. The sequential contraction in margins was mainly on the back of higher R&D expenditure which was up from 8% of sales to 8.4% in Q2FY13. We believe the margins expansion to come from US, Latin America (the turn around to continue as Brazil also picks up), and Central Eastern Europe (Currently losing money with management guiding for it to break-even next year) going ahead. Management expect margins in India to dip going ahead due to competitive pressures and other restrictions on pricing policy but overall management expects the margins to increase. The global outperformance in margins should outweigh the margin contraction in India and deliver superior EBITDA growth going ahead. We expect Core EBIDTA margins to improve from 20.4% in Q2FY13 to 22% in FY15E.”
“We expect GNP revenue to grow at 16% CAGR form FY12-15. We upgrade out price target to Rs.480 from Rs.395 and maintain our strong buy which values the company at 15x FY14E earnings and Rs. 45 to its NCE/Para IV pipeline/fillings. GNP is currently trading a a P/E of 14.5x FY14E compared to a sector mean of 18.4x. We believe stock will continue it's re-rating and the valuation gap between pharma majors and Glenmark will reduce going ahead. The major drivers for the stock going ahead would be positive data on its NCE pipeline (any outlicensing deal/ movement of pipeline products in development),” says FinQuest Securities research report.
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