Q3 earnings: Nirmal Bang reviews Glenmark, Divi's results

Below is the edited transcript of his interview with CNBC-TV18's Latha Venkatesh and Reema Tendulkar. Also watch the accompanying video.

Q: How have you read Glenmark’s numbers and any changes in the valuations or EPS on the back of these numbers?

A: Clearly, margins have been a disappointment this quarter. We were expecting around 21% kind of margins. They have given somewhere around 18% margins. So, there is a clearly a 300 bps miss there. We have revised our EPS downwards for FY13 by around 4% because of this. Currently, our target price stands revised from Rs 362 to Rs 349 now.

Q: So, you don’t have a buy on the stock at this juncture, right?

A: We have recently downgraded the stock from buy to hold. The reason being we expect the domestic market to remain muted for another quarter because of the inventory rationalisation which is going on currently. Apart from that, because of lower domestic revenues, we also expect the margins to remain muted for another quarter. So, probably we will be more constructive on the stock after probably six months.

Q: If you expect the margins to remain muted, do you expect them to slip further from this 10% mark? What would your EPS be? How much have you downgraded it by?

A: It should not fall further from here. But I expect the margins to remain muted for another quarter. Post that, we are expecting margins to stabilise somewhere around 20%. That has been revised downwards from around 22% to 20% now. So, I think it should stabilise there. Our EPS for FY13 stands at around Rs 21. It has been revised 4% downwards.

Q: Divi’s has seen higher highs for a better part of even a bad year like 2011. After the numbers, we saw some profit taking. Any view on the numbers? Is this buy on dips? What’s the story?

A: Clearly, Divi’s reported margin decline. That was the reason why this stock was being hammered. We also learn that Divi’s have got some sort of hedges now. People were earlier expecting that there are no hedges in the stock and it would be one of the primary beneficiaries of rupee depreciation. So, given that now it has got some USD 80 million of hedges, probably it won’t benefit that much. We currently don’t have a rating on the stock as of now.

Q: What about Lupin ? There was news that one of their diabetic drugs has got some temporary approvals. The stock has been up for the past few days. A little bit of profit taking today. What is the call on Lupin?

A: Lupin reported pretty strong numbers this quarter. Clearly, the margins were a big surprise for everyone. The approval that they have got is for Glumetza. It is a drug worth around USD 42-45 million. It is not a very big drug for them, but Lupin would be one of the few players in the market. So, probably it could benefit them, but not on a very large scale. We do not have a rating on the stock. The stock has already run up post their results quite a lot.

Q: Even Daiichi Sankyo came out with their numbers they posted a loss, even cut the outlook for the company. What ramifications would that have on Ranbaxy, have you followed this news?

A: Not really. But I think they have cut their profits estimates by 42% just because of forex losses. I do not know if that is something to do with Ranbaxy or purely their own forex adjust.

Q: What is the call on Ranbaxy , is all the bad news priced in?

A: I was not very positive on Ranbaxy. I think the stock should stabilise around Rs 440-450 levels.