± Glenmark recorded solid revenue growth of 34% yoy to Rs10.7bn. Growth across segments helped company to clock in more than 40% growth in FY12. The growth was mainly driven by strong yoy growth in generic business (+48%); where in US (+53%) and Europe (+170%) contributed the most. Specialty business grew by 28% yoy, amongst geographies in speciality segment, India grew by 24% and RoW was positive 25% Latin America and Europe clocked revenue growth of 43% and 39% respectively.
± Glenamrk’s 75% of the revenue is dollar dominated; hence, the part of the growth is led by better realisation due to rupee depreciation. US business which contributed 33% to overall sales grew by 53% yoy in rupee term whereas in dollar terms revenue grew by 40%. We believe US business to remain buoyant for next two years backed by company’s strong OC portfolio and exclusivities. In March 2012, the Company launched Nycomed’s Cutivate lotion under 180 days exclusivity. Glenmark’s generic version of Locoid Lipocream is also expected to be launched by end of FY13 under a royalty-bearing license from Astellas and Triax (FTF).
± Domestic business witnessed strong growth in Q4 FY12. Sales for the formulation business in India increased by 24% to Rs.2.6bn. As per ORG-IMS data, the company registered value growth of 22 % v/s the industry growth of 15%. We expect the growth momentum to continue with the restructuring activity of streamlining of channel inventory and receivables are ending.
± RoW region recorded growth of 25% in revenues led by better realisation and volume growth. According to Pharmexpert MAT December data, Russia & CIS region registered 17.8% value growth compared to market growth of 17.4%.
± Company recorded 17.5% EBITDA margin (adjusted for forex) is 200bps below our expectation. The current quarter has Rs350mn gain at the forex front at EBITDA level. Base EBITDA margins (ex-licensing income and forex loss) deteriorated by 250 bps qoq whereas improved substantially yoy. Weaker product mix & higher R&D expenses depressed EBITDA margin. Reported PAT grew by 33% yoy to Rs1.5bn whereas adjusted PAT (adjusted for currency gain) increased by 3% yoy led by higher tax expenses and lower other income in current quarter.
± Glenmark continues to chase top-line along with continuous thrust at enhancing margins. We believe management’s robust guidance of 22-25% growth in top-line and EBITDA forecast at ~9.2-9.5bn for FY13 is impressive. Even the improvement in the balance sheet, mainly the working capital cycle is notable. We maintain our BUY rating on the stock with a revised 9-month target price of Rs363.