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Hold Glenmark Pharmaceuticals; target of Rs 730: Sharekhan

Sharekhan recommended hold rating on Glenmark Pharmaceuticals with a target price of Rs 730 in its research report dated November 03, 2017.

November 13, 2017 / 04:54 PM IST
 
 
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Sharekhan's research report on Glenmark Pharmaceuticals

Glenmark Pharmaceuticals  (Glenmark Pharma) revenue grew 1.5% y-o-y to  Rs. 2,256.6 crore for Q2FY18, while operating  profit declined by 13.5% to Rs. 388.4 crore.  Adjusted profit declined 4.2% to Rs. 214.2 crore.  The weak performance was on account of a 5.7%  decline in US business and a 21.7% drop in Latin  America (LatAm) business. The US business is  witnessing pricing pressure to the tune of 13%  (versus 10-12% earlier). Moreover, raw material  cost increased 22.2%, while staff cost rose 15.5%  (owing to increments and bonuses given to  employees), leading to a sharp fall in operating  profit. However, a lower tax rate of 21.6% (versus  29.1% y-o-y) restricted the decline in adjusted  profit to 4.2%.

Outlook

Taking into account the management’s cautious  outlook, post a weak quarterly performance,  we reduce our sales and earnings estimates  by 4% /4% and 21.8%/15% for FY2018/ FY2019,  respectively. We maintain our Hold rating and  revise our PT downward to Rs. 730, valuing the  stock at 15x FY2019 earnings.

For all recommendations report, click here

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first published: Nov 13, 2017 04:54 pm

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