New York: 12:53 || London: 15:53 || Mumbai: 21:23 || Singapore: 23:53

Recommendations India

GlaxoSmithKline Pharma 4QCY2013 performance highlights and results update

February 19, 2014, Wednesday, 10:12 GMT | 06:12 EST | 15:42 IST | 18:12 SGT
Contributed by Angel Broking


Glaxo Smithkline Pharmaceuticals (Glaxo)’s 4QCY2013 results have come marginally lower than our expectations on the sales front while the net profit is lower than our expectation by 7.1%. The main disappointment came on the OPM front, which came in at 17.7% vs an expected 20.6%. The sales came in at Rs.631cr, a dip of 4.0% yoy. The gross margins came in at 50.2% (vs an expected 57.3%), a dip of 709bp. However, a higher-than-expected other income and lower taxation during the quarter led the net profit to come in at Rs.111 (vs an expected Rs.120cr), a dip of 30.0% yoy. We remain Neutral on the stock.

Below-expectation results: Glaxo posted results marginally lower than our expectations on the sales front while the net profit was lower than our expectation by 7.1% yoy. The sales came in at Rs.631cr, a dip of 4.0% yoy. Sales continued to be impacted on back of the new Drugs Prices Control Order (DPCO), which also impacted the overall profitability of the company. The main disappointment came on the OPM front, which came in at 17.7% (vs an expected 20.6%), a yoy dip of 939bp. The gross margin came in at 50.2% (vs an expected 57.3%), a dip of 709bp yoy, which was impacted by decline in sales, material costs escalation and adverse exchange rate movements. However, an higher-than-expected other income and lower taxation during the quarter led the net profit to come in at Rs.111 (vs an expected Rs.120cr), a dip of 30.0% yoy.

Outlook and valuation: Glaxo has a strong balance sheet with cash of ~Rs.2,000cr, which could be used for future acquisitions or higher dividend payouts. We expect Glaxo’s net sales to post a 6.0% CAGR to Rs.2,853cr and EPS to register a de-growth of 16.2% CAGR to Rs.59.4 over CY2013–15E. At current levels, the stock is trading at 55.3x and 50.8x CY2014E and CY2015E earnings, respectively. We remain Neutral on the stock.

Stock Market Forum