X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2018 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Glenmark: Impacted by one-offs - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

StockSelect
  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Glenmark: Impacted by one-offs
Jun 8, 2015

Glenmark has announced its 4QFY15 results. The company has reported 4.2% YoY growth in sales and a decline of 75.4% YoY in net profits. Here is our analysis of the results.

Performance summary
  • Topline grows by 4.2% YoY during the quarter. The poor growth is largely attributable to weaker sales in the US and RoW markets.
  • Operating margins decline by 6.6% to 15.8% in 4QFY15 partly attributable to forex losses, and no licensing income for the quarter.
  • Poor operating profit growth and non recurring items impact the bottom line too. The net profits are down by 75.4% YoY.

Financial performance: A snapshot
(Rs m) 4QFY14 4QFY15 Change FY14 FY15 Change
Net sales 17,035 17,757 4.2% 60,068 66,447 10.6%
Expenditure 13,218 14,943 13.0% 46,967 54,199 15.4%
Operating profit (EBDITA) 3,817 2,814 -26.3% 13,102 12,247 -6.5%
EBDITA margin (%) 22.4% 15.8%   21.8% 18.4%  
Other income (121)  3     97   69 -29.4%
Interest (net) 464 397 -14.5% 1,886 1,901 0.8%
Depreciation 603 644 6.8% 2,168 2,599 19.9%
Profit before tax 2,629 1,777 -32.4% 9,145 7,816 -14.5%
Exceptional expense 2,175 1,871 -14.0% 2,175 1,871 -14.0%
Tax   19 (200)   1,513 1,191 -21.3%
Minority Interest  3 (0)     34  1 -97.1%
Profit after tax/(loss) 432 106 -75.4% 5,423 4,753 -12.4%
Net profit margin (%) 2.5% 0.6%   9.0% 7.2%  
No. of shares (m)         270.0  
Diluted earnings per share (Rs)         17.6  
Price to earnings ratio (x)*         47.8  
*based on trailing 12 months earnings

What has driven performance in 4QFY15?
  • The net sales for the quarter were up by 4.2% YoY. The quarter witnessed healthy growth in India, Europe and LatAm markets, however US and RoW dragged the performance.

    Consolidated Business Snapshot
    (Rs m) 4QFY14 4QFY15 Change FY14 FY15 Change
    India 3,830 4,406 15.0% 15,105 17,490 15.8%
    US 5,009 5,364 7.1% 20,270 20,397 0.6%
    RoW 3,425 2,198 -35.8% 9,869 8,124 -17.7%
    Europe 1,932 2,433 25.9% 5,061 6,445 27.4%
    Latin America 1,061 1,810 70.6% 4,046 7,640 88.8%
    API 1,531 1,547 1.1% 5,353 6,052 13.0%
    Out Licensing Income 248 -   366 299 -18.2%
    Total 17,035 17,758 4.2% 60,069 66,447 10.6%

  • The domestic formulations grew by 15% YoY. The company has ramped up share in various therapies. On the exports front, the US sales witnessed sluggish growth (up 6.1% in constant currency), due to lower approvals. During 4QFY15, the company received only one approval from the USFDA. The issues in Russia continued to impact the company's performance.

  • The operating margins were impacted by sharp decline in the revenues from some regions. Other than this, the operating expenses include forex losses of Rs 510 for the quarter. Further, there were approx Rs 650 m expenses related to amalgamation of its subsidiaries. Other than this, the company had received licensing income in Q4FY14, which was not there for the current quarter. These factors impacted the operating margins. Further, the gross margins had an impact of an adjustment taken on raw materials. Hence, the current EBITDA margins are not comparable.

  • The company made provisions for a claim settlement with the state of Texas, which impacted the bottom line too. The company had made similar provision for Tarka liability in 4QFY14.

  • Glenmark received a total of U$ 150 m (approx Rs 10 bn) from Temasek and this entire amount will be utilized for repayment of the debt. Management expects its net debt to be around Rs 20 bn at the end of FY16 from Rs 30 bn currently. Glenmark will allocate 10.8 m equity shares at the rate of Rs 875 to Temasek.
What to expect?
At the current price of Rs 841, the stock is trading at a price to earnings multiple of 17.6 times our estimated FY18 earnings. The year gone by was quite challenging for Glenmark. However, the company has been able to withstand these challenges. The company continues to focus on niche launches. The Indian business too remains an important growth contributor for Glenmark. Company has been able to ramp up its market share in various therapies.

Over and above, Glenmark has witnessed progress in some of its R&D programs and expects to out-license couple of its molecules in the next 12-18 months. This will be an important trigger for the company. Having said that, please note our estimates do not factor in any such upside from these molecules, since the risk of failure are much higher in these R&D programs.

Above all, it is important to note, this is so far the only company which has not faced compliance issues from the USFDA. Couple of its facilities, including one more recently, has received USFDA clearance. The repayment of debt would help in improving the debt to equity ratio. All these aspects are certainly a positive sign. We shall have a look at the financials and revisit our target price, till then investors can Hold on to the stock.

To Read the Full Story, Subscribe or Sign In



DISCLOSURES UNDER SEBI (RESEARCH ANALYSTS) REGULATIONS, 2014
INTRODUCTION:
Equitymaster Agora Research Private Limited (hereinafter referred to as "Equitymaster"/"Company") was incorporated on October 25, 2007. Equitymaster is a joint venture between Quantum Information Services Private Limited (QIS) and Agora group. Equitymaster is a SEBI registered Research Analyst under the SEBI (Research Analysts) Regulations, 2014 with registration number INH000000537.

BUSINESS ACTIVITY:
An independent research initiative, Equitymaster is committed to providing honest and unbiased views, opinions and recommendations on various investment opportunities across asset classes.

DISCIPLINARY HISTORY:
There are no outstanding litigations against the Company, it subsidiaries and its Directors.

GENERAL TERMS AND CONDITIONS FOR RESEARCH REPORT:
For the terms and conditions for research reports click here.

DETAILS OF ASSOCIATES:
Details of Associates are available here.

DISCLOSURE WITH REGARDS TO OWNERSHIP AND MATERIAL CONFLICTS OF INTEREST:
  1. Neither Equitymaster, it's Associates, Research Analyst or his/her relative have any financial interest in the subject company.
  2. Neither Equitymaster, it's Associates, Research Analyst or his/her relative have actual/beneficial ownership of one percent or more securities of the subject company at the end of the month immediately preceding the date of publication of the research report.
  3. Neither Equitymaster, it's Associates, Research Analyst or his/her relative have any other material conflict of interest at the time of publication of the research report.
DISCLOSURE WITH REGARDS TO RECEIPT OF COMPENSATION:
  1. Neither Equitymaster nor it's Associates have received any compensation from the subject company in the past twelve months.
  2. Neither Equitymaster nor it's Associates have managed or co-managed public offering of securities for the subject company in the past twelve months.
  3. Neither Equitymaster nor it's Associates have received any compensation for investment banking or merchant banking or brokerage services from the subject company in the past twelve months.
  4. Neither Equitymaster nor it's Associates have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past twelve months.
  5. Neither Equitymaster nor it's Associates have received any compensation or other benefits from the subject company or third party in connection with the research report.
GENERAL DISCLOSURES:
  1. The Research Analyst has not served as an officer, director or employee of the subject company.
  2. Equitymaster or the Research Analyst has not been engaged in market making activity for the subject company.
Definitions of Terms Used:
  1. Buy recommendation: This means that the investor could consider buying the concerned stock at current market price keeping in mind the tenure and objective of the recommendation service.
  2. Hold recommendation: This means that the investor could consider holding on to the shares of the company until further update and not buy more of the stock at current market price.
  3. Buy at lower price: This means that the investor should wait for some correction in the market price so that the stock can be bought at more attractive valuations keeping in mind the tenure and the objective of the service.
  4. Sell recommendation: This means that the investor could consider selling the stock at current market price keeping in mind the objective of the recommendation service.
Feedback:
If you have any feedback or query or wish to report a matter, please do not hesitate to write to us.

Small Investments
BIG Returns

Zero To Millions Guide 2018
Get our special report, Zero To Millions
(2018 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

GLENMARK PHARMA SHARE PRICE


Apr 23, 2018 (Close)

TRACK GLENMARK PHARMA

  • Track your investment in GLENMARK PHARMA with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
  • Add To MyStocks

MORE ON GLENMARK PHARMA

GLENMARK PHARMA 5-YR ANALYSIS

COMPARE GLENMARK PHARMA WITH

MARKET STATS