Buy Glenmark; target of Rs 975:ICICIDirect

ICICIDirect's research report on GlenmarkRevenues grew 3.2% YoY to | 1756.4 crore (I-direct estimate: | 184.1.4 crore). The subdued growth was attributable to adverse currency movement and supply stoppages in Venezuela. This largely offset 20% YoY growth in the US to | 608.9 crore (I-direct estimate: | 633.2 crore) and 12.7% YoY growth in India to | 488 crore (I-direct estimate: | 511.0 crore). The Latin America region declined 47.2% YoY to | 123.7 crore EBITDA margins increased 544 bps YoY to 21.1% (I-direct estimate: 21.6%) due to better gross profit margins and lower other expenditure. EBITDA increased 39.2% YoY to | 369.8 crore (I-direct estimate: | 397.6 crore) Adjusted net profit increased 48.1% YoY to | 169.9 crore, (I-direct estimate: | 264.7 crore) due to a robust operational performance The stock has corrected ~40% from its peak in line with the pharma pack but also on account of currency headwinds in some of the geographies. We believe the correction is overdone and it is trading at just 15x FY18E earnings. After languishing for entire FY15, the US growth is crawling back to normal FY16 albeit on a lower base. Taking into account the product pipeline of 63 pending approvals (including 26 Para IVs) the prospects are likely to improve from FY17E. However owing to currency headwinds in some LatAm and ROW markets together with toning down of US prospects a bit by the management (due to pricing pressure, we have cut down our FY16E, FY17E and FY18E EPS estimates by 12.5%, 12.8% and 14.5% respectively. Our revised target price is | 975 based on 20x FY18E EPS of | 48.8.

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