X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 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.
GSK: OPM expansion continues - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Nov 5, 2002

    GSK: OPM expansion continues

    MNC pharma major, Glaxo's September quarter numbers appear staid in terms of topline growth. Sales growth at 5% pales in comparision to the 20% growth witnessed in June quarter. Overall, the company finished the first nine months of FY03 with an 11.5% topline growth. The sharp rise in topline in the previous quarter was on account of de-stocking exercise initiated by the company last year and hence was not sustainable. Higher other income and sharp rise in margins saw Glaxo (GSK) finish the quarter with nearly 55% bottomline growth.

    (Rs m) 3QFY02 3QFY03 Change 9mFY02 9mFY03 Change
    Sales 2,835 2,974 4.9% 7,480 8,340 11.5%
    Other Income (includes net interest) 89 142 59.9% 294 282 -4.0%
    Expenditure 2,475 2,435 -1.7% 6,702 6,812 1.6%
    Operating Profit (EBDIT) 360 539 49.9% 778 1,528 96.3%
    Operating Profit Margin (%) 12.7% 18.1%   10.4% 18.3%  
    Depreciation 53 55 3.8% 148 149 0.5%
    Profit before Tax 396 626 58.3% 924 1,661 79.8%
    Extraordinary items (54) (21) - 214 (53)
    Tax 100 232 131.6% 294 602 105.1%
    Profit after Tax/(Loss) 242 374 54.8% 844 1,006 19.2%
    Net profit margin (%) 8.5% 12.6%   11.3% 12.1%  
    No. of Shares (eoy) (m) 74.5 74.5   74.5 74.5  
    Diluted Earnings per share* 13.0 20.1   15.1 18.0  
    P/E (at current price) 16.4   18.3  
    (*- annualised)          

    The sharp expansion in operating margins continued in 3QFY03. The rise in operating margins is due to combination of restructuring benefits, reduction in employee costs and focus on high margin products. In a conscious decision, GSK discontinued its rural operations and hived off several tail end brands. A better product mix and a price rise in some of its key brands helped the company in recording a substantial rise in operating profits. The results indicate that the restructuring efforts of the company are yielding results. Improved resource allocations of marketing spend, tight control on expenses and synergies from integration and reduction in staff numbers due to manufacturing rationalisation, coupled with control on the field staff and back office headcount have helped improve profits. GSK's management had earlier indicated that the company intends to double its operating margins over a three year period.

    The new DPCO policy of the government is expected to be announced soon and GSK is likely to be a major beneficiary of the same. While big brands such as Zinetac, Zevit and Cobadex may come out of the DPCO net, Cephalasporin brand, Ceftum is expected to come under the DPCO net. Net net, drugs representing around 6% of the company's total turnover are expected to come out of DPCO coverage. The following table gives a snapshot of expected impact of the new DPCO policy.

    Drugs coming out of DPCO Turnover (Rs m)
    Zinetac 611
    Cobadex Forte 294
    Zevit 204
    Total Drugs coming out of DPCO 1,109
    Less: Drugs coming under DPCO  
    Ceftum 405
    Net Expected Effect of DPCO 704
    % of sales Turnover 5.8%

    The merger with SmithKline is already showing considerable operational cost savings. The cumulative cost savings are estimated to be in the range of Rs 470 m in the current year. The primary areas for cost savings would be bulk sourcing of raw materials, reduction in staff costs and shift from high cost manufacturing centers. The merger effect coupled with Glaxo’s focus on strategic brands is expected to result in operating margins improvement. GSK's margins have already registered a marked upturn in the last couple of quarters. We expect margins to stabilise at around 17-18%.

    Till further clarity emerges on the exact impact of the DPCO, we maintain our FY03E EPS estimate of Rs 19.8. At the current market price of Rs 330, the stock trades at 16.7x FY03E earnings.

     

     

    Equitymaster requests your view! Post a comment on "GSK: OPM expansion continues". Click here!

      
     

    More Views on News

    Sun Pharma: Bottomline Slips into the Red Amidst Challenging Environment (Quarterly Results Update - Detailed)

    Aug 14, 2017

    A challenging environment and one-time expense pushes Sun Pharma into a loss in the first quarter.

    Lupin: Bigger Challenges or Bigger Margin of Safety? (Quarterly Results Update - Detailed)

    Aug 14, 2017

    GST impact coupled with price erosion in US leads to lower profits for the quarter.

    Dr Reddy's: US Pressure Continues to Haunt (Quarterly Results Update - Detailed)

    Aug 8, 2017

    Profits plunge due to higher raw material costs.

    Biocon: Lower Licensing Income Leads to Muted Growth for the Quarter (Quarterly Results Update - Detailed)

    Jun 23, 2017

    Net Profit lower due to exceptional items in the previous year.

    Sun Pharma: Price Erosion in US Impacts Growth (Quarterly Results Update - Detailed)

    May 30, 2017

    US markets decline while other geographies grow in the quarter.

    More Views on News

    Most Popular

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    The Most Profitable Investment in the History of the World(Vivek Kaul's Diary)

    Aug 8, 2017

    'Yes, it looks like a bubble. And, yes, it's like buying a lottery ticket. But there's something happening that has never happened before. It's an evolutionary leap in money itself.'

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    Bitcoin Continues Stellar Rise(Chart Of The Day)

    Aug 10, 2017

    Bitcoin hits an all-time high, is there more upside left?

    More
    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
     

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    GSK PHARMA SHARE PRICE


    Aug 21, 2017 12:04 PM

    TRACK GSK PHARMA

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

    GSK PHARMA 5-YR ANALYSIS

    Detailed Financial Information With Charts

    COMPARE GSK PHARMA WITH

    MARKET STATS