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GlaxoSmithKline Pharma
Performance Highlights
Y/E Dec. (` cr) 1QCY2012 4QCY2011 % chg (qoq) 652 39 381 203 170 623 80 361 196 187 4.7 (51.6) 5.7 3.6 (9.1) 1QCY2011 % chg (yoy) 562 42 354 186 152 16.1 (7.6) 7.6 9.2 11.3
NEUTRAL
CMP Target Price
Investment Period
Stock Info Sector Market Cap (` cr) Beta 52 Week High / Low Avg. Daily Volume Face Value (`) BSE Sensex Nifty Reuters Code Bloomberg Code Pharmaceutical 17,563 0.5 2475/1830 4,361 10 17,173 5,222 GLAX.BO GLXO@IN
`2,134 -
Net Sales Other income Gross profit Operating profit Adj. PAT
GlaxoSmithKline Pharma (Glaxo) reported its 2QCY2012 results, just in line with estimates, both on the top-line and bottom-line fronts. The OPM also came in line with expectations at around 31.1%. Overall, the company posted net sales and adjusted net profits of `652cr and `170cr.We continue to maintain our Neutral view on the stock. Results just in line with expectations: For 2QCY2012, Glaxo reported a 16.1% yoy growth in its net sales to `652cr, just in line with estimates. The companys gross margin came in at 58.5%, just a bit lower than our expectation of 59.0%. This aided the OPM of 31.1%, ie is line with our estimate of 31.0%, for 2QCY2012. During the quarter, Glaxo reported a growth of 11.3% yoy in its adjusted net profit to `170cr, which is below our expectation of `164cr. Outlook and valuation: We expect Glaxos net sales to post a 12.2% CAGR to `2,993cr and EPS to register an 8.7% CAGR to `82.4 over CY201113E. At current levels, the stock is trading at 28.1x and 25.9x CY2012E and CY2013E earnings respectively. We remain our Neutral view on the stock.
Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 50.7 15.6 17.3 16.4
3m 4.9 8.5
1yr (3.3)
3yr 75.7
(3.2) 111.8
CY2010 2,151 12.8 581 14.3 68.6 35.3 30.7 31.1 40.6 9.3 7.5 21.2
CY2011 2,378 10.6 591 1.7 69.8 31.2 30.2 30.4 38.2 9.3 6.7 21.6
CY2012E 2,651 11.4 644 9.0 76.0 31.7 27.7 30.8 40.5 8.1 5.9 18.7
CY2013E 2,993 12.9 698 8.4 82.4 31.2 25.5 29.0 38.9 7.0 5.1 16.4
2QCY2012
1QCY2012
% chg (qoq)
2QCY2011
% chg
652 39 691 381 58.5 203 31.1 0 4 237 0 237 74 164 170 20.0
623 80 703 361 57.9 196 31.4 0 4 179 0 179 56 123 187 22.0
4.7 (51.6) (1.8) 5.7 3.6 4.4 32.6 32.6 31.5 33.1 (9.1)
562 42 604 354 63.1 186 33.1 0 5 223 (4) 219 71 148 152 18.0
16.1 (7.6) 14.4 7.6 9.2 (12.8) 6.5 8.5 4.7 11.3
1,275 128 1,403 742 58.2 398 31.2 0 8 518 (102) 416 130 286 357 42.1
0.1 6.0
9 (10.0)
Actual
Estimates
Variation (%)
(`cr)
600
562
35.0
30.0
25.0
2QCY2011
3QCY2011
4QCY2011
1QCY2012
2QCY2012
170
(` cr)
Recommendation rationale
Renewed focus on the Indian market: Glaxo is among the top five players in the Indian market, having a market share of ~5%. Post the Intellectual Property Rights (IPR) regime, the company has renewed its focus on the domestic market with the launch of five patented products (mainly Tykerb and Rotarix) in the last two years. The new product launches since CY2007 have been a key growth driver for the company and they contributed to the 27% yoy top-line growth registered by the company in CY2011. With this the new product contribution to sales has come to around 9% in CY2011.Further, in-line with market dynamics, Glaxo has launched patented products at discounts in India compared to other markets. Thus, in CY2012, we expect the company to launch 46 branded generic products. Overall, for CY2011-13E, we expect the domestic formulation business of the company to grow at a CAGR of 12%.
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Background GlaxoSmithKline Pharmaceuticals is the third largest pharmaceutical player in the Indian market with a market share of 5%. The companys product portfolio includes both prescription medicines and vaccines. Glaxo sells prescription medicines across therapeutic areas such as anti-infectives, dermatology, gynaecology, diabetes, oncology, cardiovascular disease and respiratory diseases. A large portion of the companys revenue comes from the acute therapeutic portfolio. However, the company is now scouting for opportunities in high-growth therapeutic areas such as CVS, CNS, diabetes and oncology. Further, with a strong parentage, Glaxo plans to increase its product portfolio through patented launches and vaccines.
Balance Sheet
Y/E Dec SOURCES OF FUNDS Equity share capital Preference Capital Reserves& surplus Shareholders funds Minority Interest Total loans Deferred tax liability Total liabilities APPLICATION OF FUNDS Gross block Less: Acc. depreciation Net block Capital work-inprogress Goodwill Investments Current assets Cash Loans & advances Other Current liabilities Net current assets Mis. Exp. not written off Total Assets 6 (30) 1,551 5 (45) 1,747 5 (57) 1,900 5 (62) 1,879 5 (62) 2,184 5 (62) 2,514 85 1,491 1,575 85 1,701 1,786 85 1,867 1,952 85 1,851 1,936 85 2,156 2,241 85 2,486 2,571 CY2008 CY2009 CY2010 CY2011 CY2012E CY2013E
326 236 90 10
333 241 93 21
316 217 99 25
Key ratio
Y/E Dec Valuation Ratio (x) P/E (on FDEPS) P/CEPS P/BV Dividend yield (%) EV/Sales EV/EBITDA EV / Total Assets Per Share Data (Rs) EPS (Basic) EPS (fully diluted) Cash EPS DPS Book Value Returns (%) RoCE (Pre-tax) Angel ROIC (Pretax) RoE Turnover ratios (x) Asset Turnover (Gross Block) Inventory / Sales (days) Receivables (days) Payables (days) Working capital cycle (ex-cash) (days) Solvency ratios (x) Net debt to equity Net debt to EBITDA Interest Coverage (EBIT / Interest) 39.7 24.7 39.9 29.9 40.6 31.1 38.2 30.4 40.5 30.8 38.9 29.0 43.1 43.1 71.7 40.0 186.0 59.4 59.4 61.9 30.0 210.9 68.6 68.6 68.3 40.0 230.4 69.8 69.8 53.0 45.0 228.5 76.0 76.0 78.0 30.4 264.5 82.4 82.4 84.5 33.0 303.5 48.8 29.4 11.3 1.9 10.0 28.4 10.9 35.4 34.0 10.0 1.4 8.4 23.9 9.2 30.7 30.8 9.1 1.9 7.4 20.9 8.3 30.2 39.7 9.2 2.1 6.6 21.2 8.4 27.7 27.0 8.0 1.4 5.8 18.4 7.1 25.5 24.9 6.9 1.6 5.0 16.1 6.0 CY2008 CY2009 CY2010 CY2011E CY2012E CY2013E
5.3 48 10 80 98
5.8 47 11 81 90
6.2 46 9 82 81
7.0 46 11 72 94
8.1 45 14 70 104
8.6 54 17 82 103
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(1.0) (2.6) -
(1.0) (2.6) -
(1.1) (2.7) -
(1.1) (2.8) -
(1.1) (3.0) -
10
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Website: www.angelbroking.com
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Disclosure of Interest Statement 1. Analyst ownership of the stock 2. Angel and its Group companies ownership of the stock 3. Angel and its Group companies' Directors ownership of the stock 4. Broking relationship with company covered
Glaxo Pharma No No No No
Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors.
Ratings (Returns):
11