2nd  Feb , CY11     
  
 
Glenmark Pharma Ltd. Buy
BP WEALTH
Pharmaceutical| Q1 FY18 Result Update 31st July, 2017
Solid Q1 performance led by US and India business; Maintain buy Stock Rating

Glenmark Pharma (GPL) earnings came above our estimate. The company posted revenues of Rs BUY HOLD SELL
23.6bn with 20% YoY growth which was above our estimate of Rs 22.8bn. EBITDA margin, at 25.1%,
was above our estimate of 22.1% due to favorable product mix . Adj.PAT increased at much higher
rate (47% yoy) to Rs 3.33bn, on the back of higher revenue and lower tax rate (24.9% vs 34.8%). > 15% -5% to 15% < -5%

US business accelerated in Q1
Sector Outlook Positive
US business grew 49.7% YoY to Rs10.4bn on the back of the strong mix of the base business and
Stock
new product approvals. During the quarter, GPL enjoyed FTF launch with 180-days exclusivity for ge-
CMP (Rs) 718
neric Zetia (licensing partnership with Par Pharmaceuticals). The company has launched gZetia on
Target Price (Rs) 897
Dec 12, 2016. Hence Q1FY18 has contribution of gZetia full 3 months. Management remains confident
to achieve revenue guidance of 8-10% in FY18 with EBITDA margins of 22%. Timely monitisation of BSE code 532296
key products such as gWelchol and gRenvela will be key positive trigger for the company. We believe NSE Symbol GLENMARK
continue building complex generic pipeline and approval for the same will help company to offset pric- Bloomberg GNP IN
ing pressure in US and can grow at better pace.
Reuters GLEN.BO
India Business: No impact of GST
GPL reported 15% growth in domestic business which is better than industry growth of 8.2% during Key Data
Nifty 10,015
June quarter. This growth is led by attractive discounts offered to distributors and market share gain in
key therapeutic areas cardiac, respiratory, antidiabetic and dermatology. 52 Week H/L (Rs) 993/600

Valuation & Outlook O/s Shares (Mn) 228

Market Cap (Bn) 201
The healthy performance of GPL is expected to continue due to profits generated from gZetia which
will even help the company to reduce the overall debt to equity ratio. GPL is expected to complete its 2 Face Value (Rs) 1
&3 trials two of its products GSP301 & GSP 304 by CY19 which is expected to drive the overall profit-
Average volume
ability of company in coming years. In the near term company’s derma portfolio (gConcerta, Abraxane,
3 months 17,58,825
Renegal, Renvela, Vagifem, Welchol, Nuraing combined size $14Bn) which continues to remain its
6 months 11,72,625
forte is expected to drive its profit in near terms. Looking at management guidance, good product
approval rate, new launches and sustained growth guidance. We continue to remain positive on 1 year 8,89,308
the stock and hence we give ‘BUY’ rating with target price of Rs 897(based on 16x of its FY19E
earnings). Share Holding Pattern (%)

Key Financials (Consolidated) 14.6%

5.4%
46.5%
YE March (Rs. mn) FY15 FY16 FY17 FY18E FY19E
33.5%
Revenue 66,809 77,197 91,857 100,028 115,827

Growth % 12% 16% 19% 9% 16%

EBIDTA 12,143 14,339 20,367 21,660 25,032

Growth% 11% 18% 42% 6% 16% Promoter FII DII Others

Net Profit 2,095 7,201 11,088 13,457 15,818

Relative Price Chart
Growth % -61% 244% 54% 21% 18%

Diluted EPS 7 26 39 48 56 1,000

Growth % -61% 244% 54% 21% 18%
900
Profitability & Valuation
800
EBIDTA Margin(%) 18% 19% 22% 22% 22%
700
NPM (%) 3% 9% 12% 13% 14%
600
RoE (%) 22% 24% 29% 26% 26% Jul-16 Oct-16 Jan-17 Apr-17 Jul-17
RoCE (%) 18% 21% 25% 23% 19%
Glenmark Pharma Ltd Nifty
P/E (x) 96.7 28.1 18.3 15.1 12.8
Research Analyst
EV/EBITDA (x) 18.5 15.8 11.0 10.1 8.5 Nikhil Shetty
P/BV (x) 11.4 6.6 5.0 3.9 3.0 nikhilshetty@bpwealth.com
022-61596408
Source: Company, BP Equities Research
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 BP WEALTH

Glenmark Pharma Ltd. Result Update

Revenue came above our esti-

mates mainly due to strong US
Glenmark Pharma Q1FY18 Result Overview sales and No impact of GST
on India business
Q1 Q4 Q-o-Q Q1 Y-o-Y
YE March (Rs. mn)
FY18 FY17 change % FY17 change %

Net Sales 23,294 24,244 (3.9%) 19,095 22.0%

Other Operating Income 336 328 2.6% 598 (43.8%)

Total Revenue 23,630 24,572 (3.8%) 19,694 20.0%
Less:
Raw Material Cost 7,214 7,769 (7.1%) 6,236 15.7%
Employee Cost 3,844 3,847 (0.1%) 3,720 3.3%
Operating & Manufacturing Expenses 6,797 8,517 (20.2%) 5,947 14.3%
Total Expenditure 17,856 20,133 (11.3%) 15,903 12.3%
EBIDTA 5,774 4,438 30.1% 3,791 52.3%
Less: Depreciation 777 689 12.8% 642 21.0%
EBIT 4,997 3,749 33.3% 3,148 58.7%
Less: Interest 708.6 696.7 1.7% 430.4 64.6%
Exceptional Item 0.0 (809.5)
Add: Other income 153 (513) 759
Profit before tax 4,441 1,730 156.7% 3,477 27.7%
Adjusted Profit before Tax 4,441 1,730 156.7% 3,477 27.7%
Less: Total Tax 1,108 (107) (1132.5%) 1,209 (8.4%)
Profit After Tax 3,334 1,838 81.4% 2,268 47.0%
Higher sales & higher
Minority Interest 0 0 0
contribution of exclusiv-
Share of loss in associates 0 0 0 ity product margins
Adjusted Profit After Tax 3,334 1,838 81.4% 2,268 47.0% expanded significantly at
EBITDA level
Diluted EPS (Rs.) 11.8 6.5 81.4% 8.0 47.0%
Adjusted Diluted EPS 11.8 6.5 81.4% 8.0 47.0%
Diluted No of Share (mn) 282.2 282.2 282.2
Change Change
Margin Analysis %
in bps in bps
EBIDTA Margin % 24.4% 18.1% 637 19.2% 519
EBIT Margin % 21.1% 15.3% 589 16.0% 516
NPM % 14.1% 7.5% 663 11.5% 259
Effective Tax Rate % 24.9% -6.2% 3,114 34.8% (984)
Source: Company, BP Equities Research

Institutional Research BP Equities Pvt. Limited (www .bpw ealth.com) 31/07/2017

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 BP WEALTH

Glenmark Pharma Ltd. Result Update

Strong set of numbers EBITDA showed a growth of 52.3% YoY

30,000 50% 5,000 120%

45%
25,000 40% 100%
4,000
20,000 35%
80%
30% 3,000
15,000 25% 60%
20% 2,000
10,000 15% 40%

5,000 10% 1,000 20%

5%
0 0%
0 0%
Q1FY16

Q2FY16

Q3FY16

Q4FY16

Q1FY17

Q2FY17

Q3FY17

Q4FY17

Q1FY18

Q1FY16

Q2FY16

Q3FY16

Q4FY16

Q1FY17

Q2FY17

Q3FY17

Q4FY17

Q1FY18
Revenue (In mn) YoY Growth % (RHS) EBITDA (In mn) YoY Growth % (RHS)

Source: Company, BP Equities Research

PAT showed a growth of 47% YoY EBITDA margins seen recovery

2,500 1800%
1500% 30%
2,000
1200%
1,500 900% 20%

1,000 600%
300% 10%
500
0%
0 -300% 0%
Q1FY16

Q2FY16

Q3FY16

Q4FY16

Q1FY17

Q2FY17

Q3FY17

Q4FY17

Q1FY18

Q1FY16

Q2FY16

Q3FY16

Q4FY16

Q1FY17

Q2FY17

Q3FY17

Q4FY17

Q1FY18
PAT (In mn) YoY Growth % (RHS) EBITDA Margin % PAT Margin %

Source: Company, BP Equities Research

Institutional Research BP Equities Pvt. Limited (www .bpw ealth.com) 31/07/2017

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 BP WEALTH

Glenmark Pharma Ltd. Result Update

Business Segments – Sales Mix (In mn)

Geography Q1FY16 Q2FY16 Q3FY16 Q4FY16 Q1FY17 Q2FY17 Q3FY17 Q4FY17 Q1FY18

US 5,610 5,984 6,089 6,520 6,982 7,712 12,308 10,004 10,450

15% 18% 20% 17% 24% 29% 102% 53% 50%

India 4,729 6,085 4,880 5,398 5,350 6,749 5,169 5,769 6,164

19% 27% 13% 23% 13% 11% 6% 7% 15%

ROW 1,580 2,109 2,363 2,980 1,949 2,538 2,511 2,889 2,265

-25% 21% 14% 36% 23% 20% 6% -3% 16%

Europe 1,099 1,604 1,764 2,705 1,500 1,347 1,957 2,298 1,621

12% 23% 2% 11% 37% -16% 11% -15% 8%

Latin America 2,185 1,657 1,237 2,416 1,556 1,338 947 1,340 845

86% -28% -47% 33% -29% -19% -23% -45% -46%

Formulations 15,203 17,439 16,333 20,019 17,337 19,685 22,892 22,301 21,345

16% 15% 5% 22% 14% 13% 40% 11% 23%

API 1,349 1,655 1,450 2,229 1,963 2,213 1,921 1,997 2,048

-7% 4% -1% 44% 45% 34% 32% -10% 4%

Total Revenues* 16,552 19,094 17,783 22,248 19,300 21,898 24,813 24,298 23,393
Source: Company, BP Equities Research, *Out-Licensing Revenue no Included

Revenue Mix (%)

Geography Q1FY16 Q2FY16 Q3FY16 Q4FY16 Q1FY17 Q2FY17 Q3FY17 Q4FY17 Q1FY18

US 34% 31% 34% 29% 36% 35% 50% 41% 45%

India 29% 32% 27% 24% 28% 31% 21% 24% 26%

ROW 10% 11% 13% 13% 10% 12% 10% 12% 10%

Europe 7% 8% 10% 12% 8% 6% 8% 9% 7%

Latin America 13% 9% 7% 11% 8% 6% 4% 6% 4%

Formulations 92% 91% 92% 90% 90% 90% 92% 92% 91%

API 8% 9% 8% 10% 10% 10% 8% 8% 9%

Source: Company, BP Equities Research

Institutional Research BP Equities Pvt. Limited (www .bpw ealth.com) 31/07/2017

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 BP WEALTH

Glenmark Pharma Ltd. Result Update

Key Financials (Consolidated)

YE March (Rs. mn) FY14 FY15 FY16 FY17 FY18E FY19E

Revenue 59,450 66,809 77,197 91,857 100,028 115,827

Revenue Growth (Y-oY) 19.6% 12.4% 15.5% 19.0% 8.9% 15.8%

EBIDTA 10,908 12,143 14,339 20,367 21,660 25,032

EBIDTA Growth (Y-o-Y) 7.4% 11.3% 18.1% 42.0% 6.3% 15.6%

Net Profit 5,423 2,095 7,201 11,088 13,457 15,818

Net Profit Growth (Y-o-Y) (12.5%) (61.4%) 243.7% 54.0% 21.4% 17.5%

Diluted EPS 19.2 7.4 25.5 39.3 47.7 56.1

Diluted EPS Growth (Y-o-Y) -12.5% -61.4% 243.7% 54.0% 21.4% 17.5%

No of Diluted shares (mn) 282 282 282 282 282 282

Key Ratios

EBIDTA (%) 18.3% 18.2% 18.6% 22.2% 21.7% 21.6%

NPM (%) 9.1% 3.1% 9.3% 12.1% 13.5% 13.7%

RoE (%) 18.2% 22.2% 23.6% 29.4% 25.6% 26.5%

RoCE (%) 17.3% 17.9% 21.0% 25.3% 23.0% 19.0%

Tax Rate % 21.7% 61.5% 29.6% 25.7% 23.8% 25.0%

Book Value Per share (Rs.) 105.7 63.2 108.3 143.4 186.3 236.8

Valuation Ratios

P/E (x) 37.4x 96.7x 28.1x 18.3x 15.1x 12.8x

EV/EBITDA 20.4x 18.5x 15.8x 11.0x 10.1x 8.5x

P/BV (x) 6.8x 11.4x 6.6x 5.0x 3.9x 3.0x

Market Cap. / Sales (x) 3.4x 3.0x 2.6x 2.2x 2.0x 1.7x
Source: Company, BP Equities Research

Institutional Research BP Equities Pvt. Limited (www .bpw ealth.com) 31/07/2017

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 BP WEALTH

Research Desk Tel: +91 22 61596406

Institutional Sales Desk Tel: +91 22 61596403/04/05

Disclaimer Appendix

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