GSK India has recorded encouraging performance for 1QFY03. However, the numbers for 1QFY03 unlike the corresponding quarter last year are on a consolidated basis with SmithKline Pharma and hence not comparable. On a like to like basis, the company has recorded a 9.5% growth in topline. A sharper focus on the profitable pharmaceutical brands, tight control on cost of goods and synergies from integration has resulted in encouraging margins for the company.
Operating Profit (EBDIT)
Operating Profit Margin (%)
Profit before Tax
Profit after Tax/(Loss)
Net profit margin (%)
No. of Shares (eoy) (m)
Diluted Earnings per share*
P/E (at current price)
The numbers declared by the company are much higher than market expectations. The highlight of the performance was a sharp jump in operating margins. As against market expectations of a 350 basis points rise, the company has recorded 590 basis points rise in operating margins on better than expected sales.
With little more than 50% of itís sales coming from DPCO controlled products, the company is expected to be a major beneficiary of the current DPCO dilution. According to the new DPCO guidelines, Zinetac, Cobadex, Septran and Zevit are expected to come out of price control. This represents 15% of the total turnover of the company. However, Ceftum, its cephalosporin brand is expected to come under DPCO control, which represents around 5% of the companyís sales.
At the current market price of Rs 425, the stock trades at 25x our FY03 (Dec'02) expected earnings. The stock has already had a sharp run in the last two months. Operating margins might improve further on the back of further restructuring of product portfolio to focus on profitable brands and cost management initiatives. Considering the current valuations, the stock is not expected to record any significant rise.
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