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Glenmark: Encouraging performance - Views on News from Equitymaster
 
 
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  • Aug 12, 2002

    Glenmark: Encouraging performance

    Glenmark Pharmaceuticals Ltd. has reported an encouraging 32% growth in net profits for 1QFY03, backed by sales improvement of 12%. It may be noted that the company's operating margins registered a sharp growth of 330 basis points inspite of the company's entry into low margin API business. The growth has been fuelled by an all round performance with both the domestic and export segment performing well.

    (Rs m) 1QFY02 1QFY03 % Change
    Sales 370 416 12.3%
    Other Income 1 4 233.3%
    Expenditure 304 327 7.8%
    Operating Profit (EBDIT) 66 88 32.7%
    Operating Profit Margin (%) 17.9% 21.2%  
    Interest 23 30 32.0%
    Depreciation 20 24 19.7%
    Profit before Tax 25 38 53.2%
    Tax 2 8 310.0%
    Profit after Tax/(Loss) 23 30 32.2%
    Net profit margin (%) 6.2% 7.3%  
    No. of Shares (eoy) (m) 10.1 10.1  
    Diluted Earnings per share* 9.1 12.0  
    P/E (at current price)   20.3  
    (*- annualised)      

    Glenmark is a leader in the dermatology segment which contributes around 30% to its turnover. After the acquisition of Flucort (Lyka brand) the company also has considerable presence in the steroid segment of the dermatology market. The company has also identified the anti-diabetes market as a key growth area in future. A separate marketing force catering specifically to this market has also been set up, comprising an all-India sales force of 130 medical representatives.

    Revenue Breakup
      1QFY02 1QFY03 % change
    Domestic Formulation Sales 376 421 11.9%
    Export Formulation Sales 30 41 37.3%
    Bulk Drugs 0 12 -

    The company has made a breakthrough in the API segment. The company has placed convertible debentures of Rs 500 m with CDC Financial Services and South Asia Regional Funds, to part finance its strategy of entering into the API business. However, the API strategy can put a pressure on the margins of the company once its contribution to topline becomes sizeable. In 1QFY03, this business contributed only Rs 12 m to the topline.

    The company is also eyeing generic export opportunities for which it has formed a 100% subsidiary, Glenmark Laboratories. It has also set up a new manufacturing facility at Goa as per the US FDA standards to tap generic exports to developed nations. Glenmark is expecting to get US FDA approval for this plant during 2003. It is also expecting the plant approval from Australian and South African authorities before that. Glenmark is eyeing the branded products market in the developing countries too, for which it has got 42 product registrations across 24 countries.

    The company is striving to take a lead in research activities. In a significant development, the company has recently filed patent for a new anti-asthma drug, that is currently completing pre-clinical trials. The company has also initiated dialogues with various MNCs for collaborative research projects.

    At the current market price of Rs 243, the stock trades at 8x FY03 expected earnings. Given the initiatives taken by the company and its focus on niche therapeutic segments one can expect the pace of growth to continue in future. The price has remained firm because of various R&D moves and the good growth showed by the company in the home market.

     

     

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