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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
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
Source: Company, Angel Research
Exhibit 2:2QCY2012 Actual vs. Angel estimates
Other income39 42Operating profit 203 197
Tax 74 73
Source: Company, Angel Research
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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Glaxo | 2QCY2012 Result Update
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)
Source: Company, Angel Research
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
Source: Company, Angel Research
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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Glaxo | 2QCY2012 Result Update
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)
Source: Company, Angel Research
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Glaxo | 2QCY2012 Result Update
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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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Glaxo | 2QCY2012 Result Update
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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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Glaxo | 2QCY2012 Result Update
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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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Glaxo | 2QCY2012 Result Update
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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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Glaxo | 2QCY2012 Result Update
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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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