MOSL: GLENMARK PHARMA (Neutral)-India/EU drives earnings-to spin off R&D assets
Glenmark Pharma: India/EU drives earnings; to spin off R&D assets
(GNP IN, Mkt Cap USD2.3b, CMP INR570, TP INR560, 2% Downside, Neutral)
- Revenue largely in line; other operating expenses impact margin: Revenue grew ~16% YoY to INR25.1b (our estimate: INR25.3b), led by growth in India, Europe and a favorable FX impact in the US market. Gross margin improved ~165bp YoY to 65.7% due to a change in the product mix. This, along with lower employee expense (-140bp YoY), led to EBITDA margin expansion of ~210bp YoY to 15.5%, partly offset by higher R&D cost (+150bp YoY). Absolute EBITDA, thus, increased ~34% YoY to INR3.9b (our estimate: INR4.2b). Reported PAT grew at a much lower rate (relative to EBITDA) of ~11% YoY to INR1.2b, mainly due to forex loss (INR1.3b). Adjusted for this, PAT growth was significant at ~105% YoY to INR2.1b (our estimate: INR2.3b). For 9MFY19, sales stood at INR71.8b (+7% YoY), EBITDA at INR11b (-8% YoY) and adj. PAT at INR5.7b (-13% YoY).
- DF/Europe performance impressive: US business grew moderately by ~5% YoY to USD119m. Favourable currency drove ~16% YoY growth in INR terms to INR8.6b (34% of sales). Domestic formulation (DF) business (26% of sales) grew ~15% YoY to INR6.7b, led by the increased market share in key therapies. GNP maintained its momentum in EU (13% of sales) with growth of 43% YoY to INR2.6b. ROW sales (13% of sales) grew by a muted 6% YoY to INR3.4b due to the weak performance in Russia. API (~9% of sales) grew 3% YoY to INR2.4b.
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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