Accumulate Glenmark Pharma; target of Rs 786: PLilladher

Prabhudas Lilladher`s research report on Glenmark Pharma

“Glenmark’s 15% YoY growth in net sales of Rs16.7bn and 7% YoY growth in EBITDA of Rs3.26bn were in line with our estimates. Core EBITDA margin (adjusted with one‐off in staff costs) was 21%, in line with the company guidance. While India, LatAm, and ROW markets were major contributors of growth, US generics declined by 7% (in USD) though it launched two limited competition drugs in the US. With lower other income and higher tax rate of 25%, Glenmark’s Adj. PAT grew 15% in Q2FY15.” “With pending para‐IV of 32 ANDAs (out of total pending 72 ANDAs), the company expects strong flow of new product approvals in H2FY15E and FY16E. Among key drugs expected to be launched in US in next 18 months are Tarka, Renvela, Renagel, Desmopressin and Tr‐Cylen Lo. Management has focussed on Dermatology, complex injectable in Oncology and respiratory segments for long term growth in US generics. With recruitment of medical reps for medical practitioners, Glenmark expands reach in direct marketing for ROW markets with niche products such as generic Seretide and Montelukast (combination with Levocetirizine). Domestic formulations sales grew 27% (as per AIOCD) in September 2014 and poised to grow along with double‐digit industry growth in H2FY15E and FY16E. Glenmark’s continue to receive new products growth in Cardicac and respiratory segments while Derma, Gynaecology and anti‐infective remain volume drivers in domestic formulations.” “With strong H2FY15 (driven by seasonal benefits and lower base in Q4FY15E) and niche pipeline for US, there is a possibility that Glenmak’s earnings in FY15E may outperform our earnings estimate of FY15E‐16E. We however remain cautious as business expansion in LatAm also carries the risk of high currency risk and large working capital. We maintain ‘ACCUMULATE’ with TP of Rs786,” says Prabhudas Lilladher research report. 

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