CMP Rs521, Target price Rs575, Upside 10.4%
Glenmark continued to deliver strong growth even in Q4 FY13. We had expected some cool off in Q4 FY13, but, the numbers are well above our estimates. The Company recorded revenue growth of 25.3% yoy to Rs13.3bn, ~8% ahead of our estimate. The overall growth in generic business was 25.2% yoy to Rs5.9bn, where US (+24.9%) and Europe (+62.4%) contributed the most. Specialty business grew by 24.7% yoy to Rs7.4bn. Amongst geographies in specialty segment, India registered strong growth of 32.4% and led most of the out-performance, Latin America revenues grew by 4.7% and Europe climbed up by 25.2% after registering weak performance in last quarter. RoW also continued its strong performance (+21.1%). API segment reported growth of 10.4% yoy to Rs939mn.
US sales grew by 25% yoy in rupee term whereas in dollar terms revenue grew 18% yoy. We believe US business to remain buoyant for next two years backed by companys strong OC portfolio and niche launches. Additionally, launch of Crofemeler and gaining market share in Mupirocin Calcium (current market share at 81%, launched in January 2013, Brand Size-US$56.5mn) in future will give major boost to US business. In Q4 FY13 the company received 1 ANDA approvals and filed 7 ANDAs. The management also confirmed that they might get 180 day exclusivity for generic version of Finacea. The Company currently has 83 ANDA approvals and 53 applications pending in various stages of the approval process with the US FDA (includes 21 P IV).
The Indian business grew by a stellar 32.4% vs. industry growth of 7.8% (as per AIOCD AWACS). We believe the launch of Zita and Zitamet combined with several other launches resulted in higher-than anticipated growth. The company has also improved its ranking by 3 places in India to 20th in FY13. Going ahead we expect the growth momentum to take breather on a higher base and slowing domestic growth.
RoW region reported record growth of 21.1% yoy in revenues to Rs2.2bn, largely led by growth in Russia, The secondary sales for the Russian subsidiary continued to post higher growth (59% yoy) (Candid brand sales in Russia doubled sequentially). All other regions in RoW continued to be in high growth trajectory of +20%. We expect robust growth to continue in the RoW business segment.
The business in LatAm region grew by just 4.7%, impacted by devaluation of Venezuelan currency and delays in product approvals in Brazil. Eastern European sales grew by 25% YoY on back of in-licensed products in the region.Revenue break-up
Source: Company, India Infoline Research
|Particulars (Rsmn)||Q4FY13||Q4FY12||%yoy||Q3FY13||% qoq|
|Rest of the World (ROW)||2,213||1,828||21.1||2,620||(15.5)|
Update on pipeline of NCE and NBE molecules: After indicating the failure of Phase IIb results of Revamilast (GRC 4039)
for treating Arthritis in last quarter now, Glenmark anticipates top-line data from another Phase IIb trial for Revamilast in Asthma in Q2 FY14. For GRC 17536, Glenmark
completed Phase 1 study and received approval for Phase II proof of concept study in pain indication in the UK, Germany and India. Additionally, Glenmark has initiated a Phase I/IIa study for respiratory indications in the UK. GRC 15300
(granted to Sanofi); A Phase IIa proof of concept study in neuropathic pain has been initiated in Q1 FY13 and currently its on going. GBR 500
(licensed to Sanofi); A Phase II proof of concept study in ulcerative colitis has been initiated in Q2 FY13 and is currently ongoing. Crofelemer (in-licensed);
the company obtained USFDA approval for marketing authorization in last quarter. Glenmark has initiated filings in a few countries amongst the 140 countries where Glenmark has exclusive marketing and distribution rights. mPGES-1 inhibitors
(option agreement with Forest Laboratories): currently conducting pre-clinical studies and other development
EBITDA margin was inline at 20.2% improving 267bps yoy. The margin was down by 381 bps sequentially due to significant increase in other expenses led by higher marketing spend, primarily on OTC products in Russia, GDUFA and currency volatility. Adj PAT grew by 57.5% yoy to Rs1.7bn was in line with our expectations.
Outlook & Valuation: Glenmark continues to chase top-line along with continuous thrust at enhancing margins. We believe managements robust guidance of 20% growth in top-line for next year and operating margin at around 21% is impressive. Additionally, the improvement in the balance sheet, mainly the working capital cycle is notable. We maintain our BUY recommendation with a revised target price of Rs575.Result table
Source: Company, India Infoline ResearchFinancial Summary
|QUARTERLY -(Rs. in Mn.)||Q4FY13||Q4FY12||%yoy||Q3FY13||% qoq|
|(Inc)/Decrease in stock||1,049||661||58.7||(806)||(230.2)|
|Purchase of Traded Goods||(1,015)||(365)||178.3||(1,101)||(7.9)|
|Adj Operating Profit||2,698||1,868||44.4||3,162||(14.7)|
|OPM (%)||20.2||17.5||267 bps||22.9||(381) bps|
|Minority Int & Others||(30)||(19)||-||(1)||-|
|Effective tax rate (%)||2.6||4.6||(194) bps||14.7||(1205) bps|
|Annualised Diluted EPS||24.6||17.3||42.3||31.5||(21.7)|
Source: Company, India Infoline Research
|Y/e 31 Mar (Rs m)||FY12||FY13||FY14E||FY15E|
|yoy growth (%)||36.4 ||24.7 ||19.6 ||19.4 |
|Operating profit||8,471 ||10,114 ||12,408 ||15,171 |
|OPM (%)||21.1 ||20.2 ||20.7 ||21.2 |
|yoy growth (%)||30.6 ||3.8 ||32.4 ||27.6 |
|EV/EBITDA (x)||18.7 ||15.7 ||12.5 ||9.9 |
|Debt/Equity (x)||0.9 ||0.9 ||0.5 ||0.4 |
|RoE (%)||26.7 ||23.8 ||24.9 ||24.3 |
|RoCE (%)||21.7 ||23.7 ||25.7 ||27.4 |