Glenmark Pharma (Q4 FY12)

India Infoline News Service | Mumbai |

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.

 
±  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.
Business mix
Particulars
Q4FY12
Q4FY11
%yoy
Q3FY12
% qoq
Speciality Business
5,944
4,640
28.1
5,607
6.0
India
2,682
2,160
24.2
2,547
5.3
Rest of the World (ROW)
1,828
1,463
24.9
1,571
16.3
Latin America
714
501
42.6
825
(13.4)
Europe
720
517
39.3
664
8.4
Out-Licensing Revenue
-
-
-
238
-
Generics Business
4,685
3,163
48.1
4,368
7.2
US
3,435
2,243
53.1
3,190
7.7
Europe
364
134
170.6
307
18.6
Latin America
37
167
(78)
36
3
API
850
618
37
836
2
Others
30
147
(80)
97
(69)
Total
10,659
7,951
34
10,311
3
Source: Company, India Infoline Research
 
Other conference call highlights:
 
±  In Q4 FY12, Glenmark filed 3 ANDAs with the U.S. FDA and received approval of 5 ANDAs. At end of the quarter, the company has a portfolio of 78 generic products authorized for distribution in the US market and 38 ANDAs pending for approval
±  Working capital cycle was down from 163 days in FY11 to 120 days in FY12.
±  The company expects 22-25% sales growth for FY13 (20% in the US on a higher base and 25-30% in both Latin America and RoW and ~18% in Domestic business ) 
±  Glenmark plans to file an IND for Revamilast in the US in Q3 FY 13. The company intends to initiate Phase III trials for at least one indication by end of FY 13.
±  Crofelemer case update: The Arbitration Panel granted an interim order which prohibits Napo from terminating or treating the collaboration agreement as terminated. The final Arbitration hearing is scheduled for June’ 2012.
±  Capex planned at Rs2.5bn for FY13.
 
Results table (consolidated)
QUARTERLY -(Rs. in Mn.)
Q4FY12
Q4FY11
%yoy
Q3FY12
% qoq
Net Sales
10,662
7,956
34.0
10,313
3.4
(Inc)/Decrese in stock
661
479
37.9
(385)
(271.8)
Material consumption
(3,083)
(2,496)
23.5
(3,211)
(4.0)
Purchase of Traded Goods
(365)
(42)
761.8
(876)
(58.4)
Staff Cost
(1,633)
(1,298)
25.8
(1,735)
(5.9)
Other Expenditure
(2,703)
(2,748)
(1.6)
(3,847)
(29.7)
Operating Profit
2,218
893
148.4
1,029
115.5
OPM (%)
20.8
11.2
958 bps
10.0
1082 bps
Depreciation
(236)
(243)
(2.7)
(231)
2.1
Interest
(410)
(439)
(6.6)
(357)
14.7
Other Income
23
903
(97.4)
105
(77.7)
PBT
1,595
1,114
 

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