MOSL: GSK PHARMA (Neutral)-Revenue impacted by GST rollout-margins surprise positively
​GSK Pharma: Revenue impacted by GST rollout; margins surprise positively
(GLXO IN, Mkt Cap USD3.2b, CMP INR2423, TP INR2500, 3% Upside, Neutral)
- GSK Pharma’s (GLXO) 2QFY18 sales increased 6.8% YoY (+43% QoQ) to INR8.4b (5% miss). Other income came in lower at INR96m v/s INR343m in 2QFY17. EBITDA increased significantly by 54.3% YoY to INR1.9b (+25% v/s our est.), primarily led by a decline in other expense (as % of sales) by ~600bp. EBITDA margin stood at 23% (+710bp YoY). Adjusted PAT increased ~32% YoY to INR1.3b (+3% v/s our est.), including INR52m of one-time income from the sale of properties.
- Significant recovery in inventory post GST: GLXO saw a huge improvement on the revenue front sequentially (up 43% QoQ), primarily due to a recovery in inventory to pre-GST level. Notably, GSK lost around two weeks of sales in 1QFY18. Although revenue increased YoY, it was impacted by 6% due to price deflation led by GST (but profit-level impact of GST was neutral). After adjusting for price deflation, margins stood at ~22%. With inventory levels now back to near pre-GST levels, the company expects EBITDA margin to be in the range of 18-20% over the medium term.
- New plant commissioning expected in CY18: GLXO’s manufacturing plant at Vemgal is nearing completion (expected to be commissioned by mid-CY18). GLXO guided for capex of INR5b for FY18. This will be funded by internal accruals and Thane land sale to Oberoi Realty (sale value: INR5.5b).
GlaxoSmithKline Pharmaceuticals Limited is a pharmaceutical company. The Company and its subsidiary are engaged in the business of manufacturing, distributing and trading in pharmaceuticals. The Company develops a range of products in approximately three areas, including pharmaceuticals, vaccines and consumer healthcare. The Company's product portfolio includes prescription medicines and vaccines. The Company's prescription medicines range across therapeutic areas, and it also offers a range of vaccines for prevention of life-threatening diseases, such as pneumococcal disease, meningitis, hepatitis, rotavirus, whooping cough, small pox and influenza. It provides healthcare solutions to patients, with a range of prescription medicines across areas covering anti-infectives, dermatology, gynecology, diabetes, oncology, cardiovascular disease and respiratory diseases. The Company's manufacturing unit is located at Nashik, and its clinical development center is located in Bangalore.
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