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Please refer to important disclosures at the end of this report 1

Other income 39 80 (51.6) 42 (7.6)

Gross profit 381 361 5.7 354 7.6

Operating profit 203 196 3.6 186 9.2

Source: Company, Angel Research

GlaxoSmithKline Pharma (Glaxo) reported its 2QCY2012 results, just in line with

estimates, both on the top-line and bottom-line fronts. The OPM also came in line

with expectations at around 31.1%. Overall, the company posted net sales and

adjusted net profits of`652cr and`170cr.

For 2QCY2012, Glaxo reported a 16.1% yoy

growth in its net sales to`652cr, just in line with estimates. The companys gross

margin came in at 58.5%, just a bit lower than our expectation of 59.0%. This

aided the OPM of 31.1%, ie is line with our estimate of 31.0%, for 2QCY2012.

During the quarter, Glaxo reported a growth of 11.3% yoy in its adjusted net

profit to`170cr, which is below our expectation of`164cr.

: We expect Glaxos net sales to post a 12.2% CAGR to

`2,993cr and EPS to register an 8.7% CAGR to `82.4 over CY201113E.

At current levels, the stock is trading at 28.1x and 25.9x CY2012E and CY2013E

earnings respectively.

Key financials (Consolidated)

% chg 12.8 10.6 11.4 12.9

% chg 14.3 1.7 9.0 8.4

EBITDA (%) 35.3 31.2 31.7 31.2

P/E (x) 30.7 30.2 27.7 25.5

RoE (%) 31.1 30.4 30.8 29.0

RoCE (%) 40.6 38.2 40.5 38.9

P/BV (x) 9.3 9.3 8.1 7.0

EV/Sales (x) 7.5 6.7 5.9 5.1

EV/EBITDA (x) 21.2 21.6 18.7 16.4Source: Company, Angel Research

CMP `2,134

Target Price -

Investment Period -

Stock Info

Sector

Bloomberg Code

Shareholding Pattern (%)

Promoters 50.7

MF / Banks / Indian Fls 15.6

FII / NRIs / OCBs 17.3

Indian Public / Others 16.4

Abs. (%) 3m 1yr 3yr

Sensex 4.9 (3.2) 111.8

Glaxo 8.5 (3.3) 75.7

17,173

10

17,563

0.5

2475/1830

4,361

Pharmaceutical

Avg. Daily Volume

Market Cap (`cr)

Beta

52 Week High / Low

5,222

GLAX.BO

GLXO@IN

Face Value (`)

BSE Sensex

Nifty

Reuters Code

+91 22 39357800 Ext: 6806

[email protected]

Performance Highlights

2QCY2012 Result Update | Pharmaceutical

August 10, 2012

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Glaxo | 2QCY2012 Result Update

August 10, 2012 2

Exhibit 1:2QCY2012 Standalone performance

Other income 39 80 42 128 100

Gross profit 381 361 5.7 354 742 730

Operating profit 203 196 3.6 186 9.2 398 398 0.1

Interest 0 0 - 0 - 0 0 -

Depreciation & amortisation 4 4 4.4 5 (12.8) 8 9 (10.0)

PBT & Exceptional Items 237 179 32.6 223 6.5 518 489 6.0

Less : Exceptional Items 0 0 - (4) - (102) (307)

Provision for taxation 74 56 31.5 71 4.7 130 34 281.3

11.3


Exhibit 2:2QCY2012 Actual vs. Angel estimates

Other income39 42Operating profit 203 197

Tax 74 73


Revenue grew by 16.1%, just in line with estimates

For 2QCY2012, Glaxo reported a 16.1% yoy growth in its net sales to`652cr, just

in line with our estimate. The weak top-line growth came on the back of a 16% yoy

growth in the core pharmaceuticals business.

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August 10, 2012 3

Exhibit 3:Sales trend

562

623

652

623

652

(5.0)

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

400

500

600

700

2QCY2011 3QCY2011 4QCY2011 1QCY2012 2QCY2012

Sales Growth (YoY)

%

(`cr)


OPM comes at 31.1%

The companys gross margin came in at 58.5%, just a bit lower than our

expectation of 59.0%. This aided the OPM of 31.1%, just in line with our estimate

of 31.0%, for 2QCY2012.

Exhibit 4:OPM trend

33.2

29.0

31.4 31.1

31.1

25.0

30.0

35.0

40.0

2QCY201

1

3QCY201

1

4QCY201

1

1QCY201

2

2QCY201

2


Net profit below estimates

During the quarter, Glaxo reported a growth of 11.3% yoy in its adjusted net profit

to`170cr, below our expectation of`164cr. This was mainly on the back of higher

than expected deprecation during the quarter.

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August 10, 2012 4

Exhibit 5:Adjusted net profit trend

152 146 147

187170

0

50

100

150

200

250

2QCY2011 3QCY2011 4QCY2011 1QCY2012 2QCY2012

(`

cr)


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August 10, 2012 6

Exhibit 8:Recommendation summary

Alembic Pharma. Buy 59 91 55.4 6.5 0.7 4.3 14.6 29.4 29.9

Aurobindo Pharma Buy 103 156 51.2 8.2 0.9 6.4 61.1 10.4 16.4

Aventis* Neutral 2,207 - - 21.1 2.7 17.7 12.0 16.1 17.0

Cadila Healthcare Accumulate 874 953 9.0 19.0 2.6 13.5 20.5 20.2 26.8

Cipla Accumulate 350 399 14.0 17.5 2.8 12.6 18.4 16.8 16.6

Dr Reddy's Accumulate 1,646 1,859 12.9 17.7 2.6 12.3 2.3 15.1 20.8

Dishman Pharma Accumulate 86 92 6.5 7.6 1.0 5.6 26.6 8.9 10.0

Indoco Remedies Buy 56 92 63.3 6.4 0.9 5.0 32.8 15.5 17.0

Ipca labs Buy 406 475 17.1 11.1 1.6 7.8 29.5 26.1 26.0

Lupin Accumulate 581 647 11.3 18.6 2.6 13.2 26.7 22.9 24.7Orchid Chemicals Buy 107 178 65.8 4.8 0.8 4.7 27.8 11.5 7.9

Ranbaxy* Neutral 483 - - 16.2 1.8 11.2 44.8 15.8 28.9

Sun Pharma Neutral 676 - - 23.9 4.5 10.9 0.1 26.7 18.8

Source: Company, Angel Research; Note: * December year ending;

GlaxoSmithKline Pharmaceuticals is the third largest pharmaceutical player in theIndian market with a market share of 5%. The companys product portfolioincludes both prescription medicines and vaccines. Glaxo sells prescription

medicines across therapeutic areas such as anti-infectives, dermatology,gynaecology, diabetes, oncology, cardiovascular disease and respiratory diseases.A large portion of the companys revenue comes from the acute therapeuticportfolio. However, the company is now scouting for opportunities in high-growththerapeutic areas such as CVS, CNS, diabetes and oncology. Further, with a strongparentage, Glaxo plans to increase its product portfolio through patented launchesand vaccines.

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August 10, 2012 7

Profit & loss statement

Gross sales 1,787 1,950 2,195 2,433 2,703 3,054

Less: Excise duty 94 43 44 55 52 61Net sales

Other operating income 3 3 5 1 5 5

% chg 5.2 12.6 12.9 10.3 11.6 12.9

Total expenditure 1,098 1,234 1,392 1,635 1,811 2,061

Net raw materials 656 702 788 919 1,066 1,212

Other Mfg costs 97 109 126 122 94 105

Personnel 173 209 241 279 321 370

Other 173 213 237 314 330 374

% chg 15.5 13.2 12.5 (2.0) 13.0 11.0

(% of Net Sales) 35.2 35.3 35.3 31.2 31.7 31.2

Depreciation& amortisation 16 16 18 20 17 18

% chg 17.0 13.6 12.7 (2.5) 13.9 11.1

(% of Net Sales) 34.2 34.5 34.4 30.4 31.0 30.6

Interest & other charges 1 0 1 0 - -

Other income 120 101 126 182 122 122

(% of PBT)

Share in profit of Associates - - - - - -

% chg 10.8 8.6 14.5 3.9 4.9 9.6

Extraordinary expense/(Inc.) (128) (7) 18 301 - -

Tax 238 261 293 176 306 344

(% of PBT) 28.7 33.9 34.4 29.1 32.2 33.0

Add: Share of earnings of associate - - - - - -

Less: Minority interest (MI) - - - - - -

Prior period items - - - - - -

Exceptional items - - - -

% chg 7.4 37.8 15.4 1.7 9.0 8.4

(% of Net Sales) 21.6 26.4 27.0 24.8 24.3 23.3

% chg (33.9) 37.8 15.4 1.7 9.0 8.4

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August 10, 2012 8

Balance Sheet

Equity share capital 85 85 85 85 85 85Preference Capital - - - - - -

Reserves& surplus 1,491 1,701 1,867 1,851 2,156 2,486

Shareholders funds

Minority Interest

Total loans 6 5 5 5 5 5

Deferred tax liability (30) (45) (57) (62) (62) (62)

Total liabilities

Gross block 326 333 363 316 337 358

Less: Acc. depreciation 236 241 254 217 233 251Net block

Capital work-in-progress

10 21 9 25 21 21

Goodwill

Investments

Current assets 1,452 2,183 2,510 2,761 3,193 3,681

Cash 957 1,734 2,003 2,043 2,398 2,783

Loans & advances 204 138 174 300 265 299

Other 291 311 333 419 530 599

Current liabilities 730 699 845 1,119 1,246 1,407

Net current assets

Mis. Exp. not written off - - - - - -

Total Assets

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August 10, 2012 9

Cash flow statement

Profit before tax and exceptionals 829 769 854 605 950 1,042Depreciation 16 16 18 20 17 18

(Inc)/Dec in working capital 7 15 88 63 50 58

Direct taxes paid 246 185 314 188 306 344

(Inc.)/Dec.in fixed assets (20) (18) (17) 30 (17) (21)

(Inc.)/Dec. in investments (617) (581) (31) (6) - -

Issue of equity - - - - - -

Inc./(Dec.) in loans 0 0 0.26 (0) - -

Dividend paid (Incl. Tax) (355) (394) (296) (444) (339) (367)

Others 1,187 1,156 (34) (39) - -

Inc./(Dec.) in cash 802 777 269 40 355 386

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August 10, 2012 11

Research Team Tel: 022 - 3935 7800 E-mail: [email protected] Website: www.angelbroking.com

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Disclosure of Interest Statement Glaxo Pharma

1. Analyst ownership of the stock No

2. Angel and its Group companies ownership of the stock No

3. Angel and its Group companies' Directors ownership of the stock No

4. Broking relationship with company covered No

Note: We have not considered any Exposure below `1 lakh for Angel, its Group companies and Directors.

Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%)Reduce (-5% to 15%) Sell (< -15%)

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