Shares of Glenmark Pharma jumped 7 percent intraday on Monday riding high on its December quarter results. The Mumbai-based drug company’s profit grew 1.5 percent and revenue increased 16 percent year-on-year in third quarter of FY14. Year-on-year consolidated net profit increased to Rs 216.2 crore from Rs 213 crore and revenue rose to Rs 1,601.2 crore from Rs 1,382 crore.
Numbers were better than analysts' expectations, though the net profit for the quarter is not comparable due to out-licensing income of Rs 49.3 crore reported in the previous corresponding quarter.
Consolidated earnings before interest, tax, depreciation and amortisation or operating profit grew 14 percent on yearly basis to Rs 365 crore while operating profit excluding out-licencing income jumped 34.75 percent in the quarter gone by. Operating profit margin fell 40 basis points year-on-year to 22.8 percent as against expectations of 160 basis points decline.
"Despite challenges in the operating environment, we have registered good growth in both speciality and generics businesses across the globe," Glenn Saldanha, chairman and MD said. He is reasonably confident of maintaining growth trajectory with emerging markets businesses being a key growth driver going ahead.
Key takeaways from Glenmark’s Q3 FY14 concall:
Management reiterated guidance of 20 percent topline growth and EBITDA of Rs 1225 crore for FY14. However they believe they might exceed the guidance. Management’s endeavor is to improve EBITDA margin by 100 bps every year. Management expects operating leverage to continue.
Lack of Abbreviated New Drug Application (ANDA) approvals affected growth in US during the quarter. Management saw reduction in Montelukast sales due to pricing pressure which also affected growth in the region. Management continues to see improvement in margin in the geography. Company will be filing 8-10 ANDAs in Q4 FY14.
Active pharmaceutical ingredient (API) business has seen a very strong growth sequentially of 46.3 percent, primarily due to low base. Crofelemer API supply contributed USD1mn during the quarter.
Domestic business continues to outperform the overall market, growing at 15.3 percent Y-o-Y. Management believes that the overall domestic market will start to see strong growth from Q2-Q3 FY15 onwards.
Winter was mild in Russia in Q3 FY14, which slightly affected company’s growth in the region. Currently there are no major challenges in the country, however product approval has slowed down. 20-25 percent of Glenmark’s Russia revenues come from over-the-counter (OTC) space.
Latin America growth is primarily driven by markets other than Brazil.
Company has received generic Seretide approval in couple of emerging markets. Glenmark is focused on building good respiratory franchise in key emerging markets. Management indicated that MDI’s (metered dose inhalers) have a bigger market than DPI’s (dry powder inhalers) in emerging markets.
Management expects Crofelemer approval for emerging markets from FY15, however meaningful sales will commence from FY16.
Company has net debt of Rs 2563 crore and cash of Rs 650 crore.
Inventory, debtor and creditor days are 63 (against 62 days in FY13), 120 (against 131 days in FY13), and 73 days (against 77 days in FY13) respectively.
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