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Glenmark: Other Income Boosts Profit Growth - Views on News from Equitymaster
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Glenmark: Other Income Boosts Profit Growth
Sep 6, 2016

Glenmark has announced its results for June quarter of financial year 2016-17 (1QFY17). The company has reported 15.8% YoY growth in net sales and 24% YoY increase in net profits. Here is our analysis of the results.

Performance summary
  • Topline (including other operating income) grows by 17.9% YoY during the quarter. Barring Latin America, all the major geographies have shown a healthy growth for the quarter. The growth in the US business (up 24%)was driven by new launches. Glenmark also launched Crestor generics under 180-days exclusivity. However, given there were many players from the day one of the launch, the price erosion has been quite immense. India business was impacted (up 10%) due to pricing policy and Zita (Sitagliptin), which was there last year. Glenmark continues to face challenges from Venezuela, while it has already stopped supplies in this geography, company is yet to repatriate around US$ 45 m from this market.
  • Operating margins declined by 230 bps to 19.5% in 1QFY17 due to higher operating expenses. Employee costs for the quarter surged by 30% YoY. Sharp increase in the employee costs is due to increase in resources on the R&D side.
  • The bottom line of the company surged by 24% YoY on the account of sharp surge in the other income. This largely pertains to forex gain on mark to market receivables. Over and above, the tax expenses for the quarter were on the higher side. The tax costs will normalize and is expected to be at 25% for the full year.

    Financial performance: A snapshot
    (Rs m) 1QFY16 1QFY17 Change
    Net sales 16,258 18,832 15.8%
    Other operating income 219 598 173.1%
    Expenditure 12,884 15,640 21.4%
    Operating profit (EBDITA) 3,593 3,791 5.5%
    EBDITA margin (%) 21.8% 19.5%
    Other income 53.7 759.2 1313.5%
    Interest (net) 419 430 2.7%
    Depreciation 654 643 -1.7%
    Profit before tax 2,574 3,477 35.1%
    Tax 745 1,209 62.3%
    Profit after tax/(loss) 1,828.90 2,267.52 24.0%
    Net profit margin (%) 11.2% 12.0%
    No. of shares (m) 282.2
    Diluted earnings per share (Rs) 27.0
    Price to earnings ratio (x)* 31.1

    *based on trailing 12 months earnings

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