Glaxo: 1HFY02 PBT drops 34% - Views on News from Equitymaster

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Glaxo: 1HFY02 PBT drops 34%

Jul 28, 2001

Glaxo has reported a sharp drop in sales and PBT for 2QFY02. The results declared by the company were more or less expected by the markets. There is an one time charge of Rs 75 m in 2QFY02 on account of expenses of new launches and restructuring expenses in relation with amalgamation of SmithKline Beecham. Though operating margins have dropped at the look of it, after adjusting for one time charges, the operating margins have remained stable.

(Rs m)1HFY011HFY02%Change2QFY012QFY02%Change
Sales 4,700 3,927 -16.5% 2,867 1,983 -30.8%
Other Income 161 147 -8.6% 81 83 3.0%
Expenditure 4,244 3,631 -14.4% 2,555 1,850 -27.6%
Operating Profit (EBDIT) 456 296 -35.2% 312 133 -57.4%
Operating Profit Margin (%)9.7%7.5% 10.9%6.7% 
Interest 47 42 -9.0% 26 20 -23.7%
Depreciation 77 74 -4.8% 38 36 -5.8%
Profit before Tax 493 327 -33.8% 329 161 -51.2%
Extraordinary Income 155 394   105 394  
Tax 212 193 -9.0% 139 129 -7.3%
Profit after Tax/(Loss) 436 527 20.8% 295 425 44.1%
Net profit margin (%)9.3%13.4% 10.3%21.4% 
No. of Shares (eoy) (m) 60 60   60 60  
Diluted Earnings per share* 14.6 17.6   19.7 28.4  
P/E (at current price) 14.4  8.9 
(*- annualised)      

The decline in turnover can largely be attributed to drop in sales of Ceftum, Cobadex, Forte and Betnesol, the key products for the company. The company has identified 30 strategic key brands, which contributes around 75% of the total turnover. The promotion expenses would be restricted to brands that have potential to provide growth momentum. Going forward, the company also plans to have tighter control over its administrative costs. Glaxo has recently launched an anti asthma (Seretide) an anti-allergy drug (Flixonase) and an smoking cessation pill (Zyban).

At the current market price of Rs 253, the stock is trading at a P/e of 12x its expected earnings for FY02. The company is expected to benefit on account of cost savings from amalgamation with SmithKline Pharma.

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