Buy Glenmark Pharma; target of Rs 585: Motilal Oswal

Motilal Oswal is bullish on Glenmark Pharma and has recommended buy rating on the stock with a target of Rs 585 in its February 1, 2013 research report.
 
“Glenmark Pharmaceuticals (GNP) posted better than expected results for 3QFY13. Net sales grew 34% YoY to INR13.8b (v/s our estimate of INR12.61b). We estimate core sales to have grown 33% YoY (v/s our forecast of 25.7% YoY) to INR13b (v/s our forecast of INR12.3b). Out-licensing income (OLI) was INR493m (v/s our estimate of nil OLI). Reported EBITDA grew 54.3% YoY to INR3.2b (v/s our estimate of INR2.56b) and EBITDA margin expanded 300bp YoY to 23.2% (v/s our estimate of 20.3%). Core EBITDA (excluding one-offs) grew 56% YoY to INR2.5b (v/s our estimate of INR2.41b), with core EBITDA margin at 19.6% (as expected).  Adjusted PAT was INR1.58b (v/s our estimate of INR1.47b) compared to PAT of INR76m in 3QFY12. Adjusted PAT was higher than our estimate mainly due to stronger than expected growth in core sales. YoY PAT growth appears very strong as there were forex losses of INR1.02b in 3QFY12 while there is a forex gain of INR40m for 3QFY13.”
 
“Despite 3QFY13 results being better than expected, our earnings estimates remain unchanged. Tax has tempered better operational performance and GNP has indicated that the current strong topline growth in some geographies will normalize over the coming quarters. The stock trades at 19.4x FY14E and 15.9x FY15E EPS. Maintain Buy with a target price of INR585 (18x FY15E EPS + INR15 DCF value for Crofelemer and Para-IV upsides),” says Motilal Oswal research report.

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