MOSL: GLENMARK PHARMA (Neutral)-Heavy promo spend cause sprain in earnings-Restructuring in progress
Glenmark Pharma: Heavy promo spend cause sprain in earnings; Restructuring in progress
(GNP IN, Mkt Cap USD2.2b, CMP INR546, TP INR525, 4% Downside, Neutral)
- Sales largely in-line led by ROW/API: Sales increased 12% YoY to INR25b (our estimate: INR25.5b), led by growth of 29% YoY (to INR4b) in ROW sales and 21% YoY (to INR2.5b) in API sales. India sales grew at a moderate rate of 9.7% YoY to INR7b, while US sales were up 10% YoY at INR7.7b, largely supported by FX tailwinds. Gross margin (GM) improved 80bp YoY to 65.9% due to a superior product mix. EBITDA margin expanded 80bp YoY to 13.9% (our estimate: 15.9%), led by higher GM and lower opex (adjusting for one-time expense of INR250m related to set-up of Glenmark LifeScience). Also, there was a one-time promotional expense of INR350m pertaining to the launch of Remogliflozin (SGL2) in India. EBITDA increased 11% YoY to INR3.3b (our estimate: INR4b), while PAT grew at a relatively low rate of 3% to INR1.6b (our estimate: INR2.3b) due to higher interest and lower other income.
- FY19 performance: Sales increased 8% YoY to INR97b (+8% YoY), while EBITDA/PAT declined 2%/9% YoY to INR14.5b/INR7.3b.
Glenmark Pharmaceuticals is engaged in the discovery of new molecules, both NCEs (new chemical entity) and NBEs (new biological entity), with seven molecules in various stages of clinical development & pre-clinical development. Co.'s Drug Discovery business primarily focuses in the areas of inflammation, metabolic disorders and pain. Co.'s Formulations business focuses on therapeutic areas such as dermatology, anti-infectives, respiratory, cardiac, diabetes, gynecology, CNS, and oncology. Co.'s Glenmark Generics Ltd. business focuses on developing, manufacturing, selling and the distribution of generics through wholesalers, retailers and pharmacy chains.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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