Result Update
February 13, 2015
Rating matrix
Rating
Target
Target Period
Potential Upside
:
:
:
:
Glenmark Pharmaceuticals (GLEPHA)
Hold
| 824
12 months
8%
| 765
Performance hurt by forex loss; outlook promising
What’s Changed?
Target
EPS FY15E
EPS FY16E
EPS FY17E
Rating
Changed from | 75 to | 824
Changed from | 28 to | 22.1
Changed from | 33.4 to | 34.7
Changed from | 45.2 to | 45.4
Unchanged
Quarterly Performance
Revenue
EBITDA
EBITDA (%)
Net Profit
Q3FY15
1,701.3
265.7
15.6
114.8
Q3FY14 YoY (%)
1,601.8
6.2
365.0
-27.2
22.8 -717 bps
216.2
-46.9
Q2FY15 QoQ (%)
1,680.7
1.2
335.8
-20.9
20.0 -437 bps
165.1
-30.5
FY14
6007.3
1310.4
542.6
20.0
FY15E
6623.5
1243.3
599.2
22.1
FY16E
7890.4
1682.3
939.8
34.7
FY17E
9286.0
2092.9
1231.5
45.4
FY14
38.2
41.2
15.0
5.8
18.3
16.0
FY15E
34.6
37.3
16.1
5.1
17.7
17.4
FY16E
22.1
23.8
11.8
4.2
23.1
23.8
FY17E
16.8
18.2
9.2
3.4
25.1
28.6
Key Financials
(| Crore)
Revenues
EBITDA
Net Profit
EPS (|)
Valuation summary
PE (x)
Target PE (x)
EV to EBITDA (x)
Price to book (x)
RoNW (%)
RoCE (%)
Stock data
Amount
| 20741 crore
| 3267 crore
| 803 crore
| 23205 crore
641/488
|27.1 crore
|1
Particular
Market Capitalisation
Debt (FY14)
Cash (FY14)
EV
52 week H/L
Equity capital
Face value
Price performance (%)
Glenmark Pharma
Divi's Labs
Cadila Healthcare
1M
1.6
-4.2
-10.3
3M
-3.1
-6.3
1.8
6M
13.4
8.7
37.7
1Y
32.7
18.9
63.5
Research Analyst
Siddhant Khandekar
[email protected]
Mitesh Shah
[email protected]
Nandan Kamat
[email protected]
ICICI Securities Ltd | Retail Equity Research
• Revenues grew 6.2% YoY to | 1701 crore in line with I-direct estimate
of | 1680.3 crore. India, LatAm and RoW sales grew 13.6%, 105.8%
and 27.3% YoY to | 433 crore, | 234 crore and | 173 crore,
respectively. On the other hand, US and RoW declined 2.7% and
31.3% YoY to | 507 crore and | 207 crore, respectively
• EBITDA margins declined 718 bps to 15.6%, lower than I-direct
estimate of 20.5% mainly due to forex losses. EBITDA declined 27.2%
YoY to | 265.7 crore, less than I-direct estimate of | 344.2 crore
• Net profit declined 47% YoY to | 115 crore, lower than I-direct
estimate of | 179.2 crore on the back of a lower margins
US generics business provide impetus after R&D setbacks
After toying with R&D success and subsequent setbacks, the company
has successfully developed and nurtured the US generics franchise. US
generics now comprise ~30% of total turnover and have grown at a
CAGR of 23% in the last five years. Total USFDA filings as on date are 169
and so far the company has received approvals for 94. From the pending
ANDAs, 33 are Para IV applications. Key therapies in the US are oral
contraceptives, pain management and CVS. The new focus areas in the
US will be oncology, respiratory and dermatology. However, the
management remains guarded on growth prospects in the US due to
slower pace of product approvals in the US and consolidation in the
distribution space. We expect US sales to grow at a CAGR of 16% in
FY14-17E to | 3125 crore.
Targeting specific therapies in IPM
Glenmark ranks 16th in domestic formulations with a market share of
2.19%. It is market leader in dermatology and is improving its presence in
therapies such as respiratory, CVS and anti-infectives. It has defied muted
growth in IPM in FY14 by growing at 16% vis-à-vis IPM growth of 6% by
churning the portfolio. We expect sales from India to grow at a CAGR of
16% in FY14-17E to | 2353 crore.
US generics, India formulations main growth drivers; R&D can wait
The R&D setback in 2008-10 has, in fact, benefited the company as the
focus has shifted to more productive segments such as the US, India and
RoW markets. The changed focus has improved operating cash flows as
well as leverage situation as the debt-EBITDA has improved from a high
of 4.6x in FY09 to 2.5x in FY14. Glenmark has also focused more on niche
therapies such as dermatology, oral contraceptives and respiratory where
competition is relatively less intense.
Management optimistic on US, RoW markets, going ahead
After languishing for a few quarters, the US franchisee is likely to get
some momentum, thanks to the interesting approvals lined up in FY16-17.
Taking into account the product pipeline (including 33 Para IVs) the
prospects are certainly to improve in FY16E and FY17E if indeed the
momentum improves. Indian formulation growth is likely to remain at
elevated level (Q3 was slightly muted), going ahead. Other geographies
such as Europe, Latin America are emerging as new growth drivers but
these geographies are slightly lumpy in nature. Respiratory launches in
Russia despite adversaries bode well for RoW traction. We have valued
the company at | 824 on SOTP basis. We ascribe | 817 to base business
based on 18x FY17E EPS of | 45.4 and we have calculated NPV of | 7 for
gZetia.
Variance analysis
(| crore)
Revenue
Q3FY15 Q3FY15E
1,701.3 1,680.3
Q3FY14
1,601.8
Q2FY15
1,680.7
YoY (%)
6.2
QoQ (%)
1.2
Raw Material Expenses
Employee Expenses
Other expenditure
Total Expenditure
EBITDA
EBITDA (%)
Interest
Depreciation
Other income
EO expenses
PBT
Tax
PAT
MI
Net Profit
556.0
316.5
563.1
1,435.6
265.7
15.6
51.3
65.5
2.1
0.0
151.0
36.3
114.8
0.0
114.8
534.8
341.8
459.6
1,336.2
344.2
20.5
51.5
65.9
3.0
0.0
229.8
50.6
179.2
0.1
179.2
537.3
273.5
426.0
1,236.8
365.0
22.8
47.3
61.1
5.1
0.0
261.7
47.4
214.3
-1.9
216.2
548.9
3.5
1.3
355.3
15.7
-10.9
440.7
32.2
27.8
1,344.9
16.1
6.7
335.8
-27.2
-20.9
20.0 -717 bps -437 bps
51.6
8.6
-0.6
65.0
7.1
0.7
1.0
-58.2
119.1
0.0
0.0
0.0
220.2
-42.3
-31.4
55.2
-23.4
-34.3
165.0
-46.5
-30.5
-0.1
NA
NA
165.1
-46.9
-30.5
Key Metrics
USA
507.2
516.1
521.4
507.6
-2.7
-0.1
India
Europe
433.1
173.0
476.5
135.8
381.2
135.8
478.2
130.6
13.6
27.3
-9.4
32.5
Latin America
RoW markets
234.4
207.1
199.4
180.6
113.9
301.0
230.9
174.0
105.8
-31.2
1.5
19.0
API
Out-licensing income
146.5
0.0
162.7
0.0
147.9
0.0
159.5
0.0
-1.0
0.0
-8.2
0.0
Comments
Slow growth was mainly due to muted growth in the US (-2.7%) on account of lack
of new product approvals and 31% de-growth in RoW due to currency related issues
in Russia.
Includes | 106 crore of forex loss.
contraction in margin mainly due to higher forex loss.
Decline in net profit was synch with operational performance and higher taxation.
YoY de-growth on the back of lack of new product launches and channel
consolidation.
Growth was mainly driven by new product launches including gSeretide.
Despite currency volatility, 200%+growth in Mexico and Venezuela drove the
growth in Latin America
Subdued growth was mainly due to adverse currency movement in Russia
Source: Company, ICICIdirect.com Research
Change in estimates
(| Crore)
Revenues
EBITDA
EBITDA Margin (%)
Net Profit
EPS (|)
Old
6,822.0
1,465.6
21.5
759.4
28.0
FY15E
New % Change
6,623.5
-2.9
1,243.3
-15.2
18.8
599.2
22.1
-271 bps
-21.1
-21.1
Old
7,940.2
1,688.7
FY16E
New % Change
7,890.4
-0.6
1,682.3
-0.4
21.3
907.1
33.4
21.3
939.8
34.7
5 bps
3.6
3.7
Comments
Reduction in FY15 EBITDA estimates after incorporating margin fall in H2FY15 due to
forex losses especially in Russia.
Reduction in estimates in synch with reduction in EBITDA in FY15
Source: Company, ICICIdirect.com Research
Assumptions
(| crore)
USA
India
Europe
Latin America
RoW markets
API
Out-licensing income
FY13
1,688.7
1,309.6
372.4
346.8
FY14
2,027.1
1,510.5
506.1
404.6
812.2
397.6
49.3
986.0
529.2
36.5
Current
FY15E
FY16E
2,019.3 2,373.8
1,760.3 2,077.2
584.8
792.1
795.4 1,002.0
798.0
626.6
29.9
922.7
720.6
0.0
Earlier
FY15E
FY16E
2,043.5 2,402.6
1,777.1 2,097.0
639.6
767.5
634.7
825.1
1,045.9
650.2
29.9
1,098.2
747.8
0.0
Comments
Change in FY16 estimates to factor abnormal growth in Venezuela, Mexico and
growth recovery in Brazil on the back of new product launches.
Reduction in estimates to factor in currency volatility in Russia
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research
Page 2
Company Analysis
Incorporated in 1977 Glenmark was never a mass-market player with a
clear focus on niche areas such as dermatology, respiratory and
cardiology. The company was one of the few Indian players (like DRL) to
identify the importance of dedicated R&D efforts in the nineties. Post its
maiden IPO in 2000, the company started ramping up API business via
small acquisitions. In 2005 it struck its first out-licensing R&D seal with US
based Forest Laboratories for COPD/asthma molecule with Oglemilast.
Similar R&D deals were struck with Innovator companies such as Eli Lily
and Merck KGaA (Germany). It received a substantial amount in the
nature of upfront – milestone payments. However, it received a setback in
most of these deals, one after another during 2007-09, as clients were
unsatisfied with the progress or not interested to pursue the same any
further due to changed priorities or budgetary constraints.
This had hit the company hard during that period as, unlike other Indian
players which hived off the risky R&D ventures into separate companies
to protect core balance-sheet, Glenmark hived off the generic business.
Its balance sheet got stretched with huge debts with the D/E and
debt/EBITDA ratio swelled to 2x and 4x, respectively. However, post the
R&D debacle the company refocused on the generics business especially
in the US and Indian formulations putting R&D on the backburner. The
changed has worked going by the performance in the last two-three years
as the strong traction in the US, backed by forays into niche areas such as
oral contraceptives and dermatology, robust growth in Indian
formulations and strong tractions from ROW and Latam markets have
improved the balance sheet and operating cash-flows significantly. The
R&D deals are still active but the focus on the innovative R&D and generic
R&D is almost equal. The company has almost fully recovered the amount
spent on innovative R&D which is almost US$200 million in the last nine
years. With other geographies also chipping in, the growth, going ahead
is likely to be broad based with India and the US, the largest geographies
growing at a decent pace and emerging segments such as RoW markets
and Latin America showing greater traction. The company also remains
committed to API exports. We expect sales to grow at a CAGR of 16% to
| 9286 crore between FY14 and FY17E.
Exhibit 1: Revenues to grow at CAGR of 16% in FY14-17E
10000
9286
7890
(| crore)
8000
6007
6000
4000
2093
2485
4022
4022
FY12
FY13
6624
2954
2000
0
FY09
FY10
FY11
FY14
FY15E
FY16E
FY17E
Revenues
Source: Company, ICICIdirect.com Research
Glenmark has reclassified it operations into six categories - India, US,
Europe, Latin America, ROW markets and APIs. Earlier the classification
was on the basis of - 1) specialty businesses and 2) generics businesses.
ICICI Securities Ltd | Retail Equity Research
Page 3
India (25% of overall sales) – In India it operates through over 20 divisions
with focus on dermatology, cardiology, respiratory and anti-infectives
among all. The company markets over 350 products in India. As AIOCD
MAT 2014, Glenmark ranks sixteenth in IPM with a market share of 2.19%.
Among therapies, it ranks second in dermatology, sixth in respiratory and
tenth in cardiology. The current MR strength of the company is ~3200
and the MR productivity is | 47.2 lakh per MR. The acute: chronic ratio for
Glenmark is 63: 37.
Exhibit 2: India business major growth driver…
2500
2353.2
2046.2
2000
1779.3
(| crore)
1510.5
1500
1309.6
1000
614.2
752.9
844.7
1002.1
500
0
FY09
FY10
FY11
FY12
FY13
FY14
FY15E
FY16E
FY17E
India
Source: Company, ICICIdirect.com Research
The US (34% of overall sales) – The US generic business is being
operated through its subsidiary Glenmark Generics Limited. It focuses on
developing, manufacturing and the distribution of generics through
wholesalers, retailers and pharmacy chains. Glenmark’s US strategy is to
focus on less crowded therapies such as oral contraceptives,
dermatology, oncology, etc. Typically, the company focuses on small
ticket but niche opportunities. Till date, the company has filed 169 ANDAs
with the USFDA. Of these, it has received approval for 94 ANDAs. It is
currently awaiting USFDA approval for 75 ANDAs, of which 33 are Para IV
applications.
Exhibit 3: … so is the US
3500
3125.2
3000
2681.4
2301.0
(| crore)
2500
2027.1
2000
1688.7
1500
1000
1213.7
733.8
723.0
FY09
FY10
835.2
500
0
FY11
FY12
FY13
FY14
FY15E
FY16E
FY17E
USA
Source: Company, ICICIdirect.com Research
The drug discovery business is focusing on areas of inflammation
(asthma/COPD, rheumatoid arthritis, etc.), metabolic disorders (diabetes,
obesity, etc.) and pain (neuropathic pain and inflammatory pain).
ICICI Securities Ltd | Retail Equity Research
Page 4
Glenmark has a pipeline of six molecules – 3 NCEs and 4 NBEs in various
stages of preclinical and preclinical development. Of these, five are in
clinical trials. Glenmark has been following a strategy of out-licensing
research-staged molecules in clinical development to MNCs. So far
Glenmark has struck seven deals in the last nine years booking ~US$ 200
million as upfront and milestone payments.
Exhibit 4: Higher R&D spend here to stay….
1000
6.5
8
625.7
538.6
6
4.7
4.2
400
6.5
261.3
3.1
88.3
76.8
FY09
FY10
10
(%)
(| crore)
600
882.09.5
749.4
9.0
800
200
9.5
9.4
4
261.3
138.0
2
0
0
FY11
FY12
R & D cost
FY13
FY14
FY15E
R & D cost (% revenue)
FY16E
FY17E
Source: Company, ICICIdirect.com Research
Exhibit 5: Margins remains under pressure due to higher R&D spend
2400
2000
1682.3
21.7
20.2
1200
21.1
847.1
455
619.6
596.8
FY10
FY11
1310.4 1243.3
21.1
21.8
847.1
22.5
21.3
26
22
(%)
(| crore)
1600
800
2092.9
24.9
18.8
18
400
14
0
FY09
FY12
EBITDA
FY13
FY14
FY15E
FY16E
FY17E
EBITDA Margins (%)
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research
Page 5
Exhibit 6: Net profit to grow at CAGR of 31% in FY14-17E on lower base
1500
18
13.1
11.4
900
9.4
600
453.2
460.3
12
8
6
324.5
300
14
10
599.29.0
542.6
9.0
460.3
13.3
939.8
11.9
11.4
16
(%)
15.3
1200
(| crore)
1231.5
4
196.1
2
0
0
FY09
FY10
FY11
FY12
FY13
Net Profit
FY14
FY15E
FY16E
FY17E
Net Profit Margins (%)
Source: Company, ICICIdirect.com Research
Exhibit 7: Return ratios to improve, going ahead…
31
28.6
28
23.8
(%)
25
22.5
22.5
22
19
19.7
16
16.5
14.8
14.1
13
19.3
16.3
18.8
15.3
17.7
18.3
25.1
23.1
17.4
16.0
10
FY09
FY10
FY11
FY12
FY13
RoNW (%)
FY14
FY15E
RoCE (%)
FY16E
FY17E
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research
Page 6
Exhibit 8: Trends in quarterly financials
(| crore)
Q3FY12
Q4FY12
Q1FY13
Q2FY13
Q3FY13
Q4FY13
Q1FY14
Q2FY14
Q3FY14
Q4FY14
Q1FY15
Q2FY15
Q3FY15
Net Sales
1031.1
1065.9
1040.4
1255.2
1381.3
1335.5
1237.9
1463.0
1601.2
1681.7
1477.8
1671.5
1692.1
5.7
1.2
0.2
0.3
0.3
0.4
0.4
0.4
0.4
0.4
0.5
21.8
9.1
9.2
9.2
1638.2
0.2
1031.3
1066.2
1040.7
1255.6
1381.6
1335.9
1238.2
1463.4
1601.8
1703.6
1486.9
1680.7
1701.3
6.2
1.2
370.3
410.9
366.3
442.6
467.7
377.0
405.0
486.9
537.3
443.9
447.2
548.9
556.0
3.5
1.3
35.9
38.5
35.2
35.2
33.9
28.2
32.7
33.3
33.5
26.1
30.1
32.7
32.7
-86.5
2.2
661.1
655.3
674.4
813.0
913.9
958.9
833.3
976.5
1064.4
1259.7
1039.7
1131.8
1145.3
7.6
1.2
64.1
61.5
64.8
64.8
66.1
71.8
67.3
66.7
66.5
73.9
69.9
67.3
67.3
86.5
-2.2
Employee cost
173.4
163.3
165.6
201.6
212.4
208.7
210.8
264.5
273.5
277.4
276.4
355.3
316.5
15.7
-10.9
% to revenues
16.8
15.3
15.9
16.1
15.4
15.6
17.0
18.1
17.1
16.3
18.6
21.1
18.6
152.6
-253.5
384.8
270.3
343.7
340.1
381.4
495.4
374.7
396.4
426.0
600.7
421.0
440.7
563.1
32.2
27.8
37.3
25.4
33.0
27.1
27.6
37.1
30.3
27.1
26.6
35.3
28.3
26.2
33.1
649.6
687.9
928.5
844.4
875.6
984.2
1061.5
1081.1
990.5
1147.7
1236.8
1321.9
1144.6
1344.9
1435.6
16.1
6.7
90.0
79.2
84.1
78.4
76.8
80.9
80.0
78.4
77.2
77.6
77.0
80.0
84.4
717.1
436.7
102.9
221.8
165.1
271.3
320.2
254.8
247.8
315.7
365.0
381.6
342.3
335.8
265.7
-27.2
-20.9
10.0
20.8
15.9
21.6
23.2
19.1
20.0
21.6
22.8
22.4
23.0
20.0
15.6
-717.8
-436.7
Other operating income
Revenues
Raw material cost
% to revenues
Gross Profit
Gross Profit Margin (%)
Other expenditure
% to revenues
Total Expenditure
% to revenues
EBIDTA
EBITDA margin (%)
YoY (%) QoQ (%)
Depreciation
23.1
23.6
27.5
32.1
35.6
31.8
34.9
60.5
61.1
60.3
65.1
65.0
65.5
7.1
0.7
Interest
35.9
41.0
38.0
38.4
40.0
43.6
46.4
48.5
47.3
46.4
48.1
51.6
51.3
8.6
-0.6
Other income
10.8
2.3
2.6
6.6
5.2
-5.0
3.3
13.4
5.1
-12.1
3.5
1.0
2.1
-58.2
119.1
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
217.5
0.0
0.0
0.0
PBT
54.5
159.5
102.2
207.4
249.7
174.4
169.8
220.1
261.7
45.3
232.6
220.2
151.0
-42.3
-31.4
Tax
8.4
7.3
21.8
47.7
36.6
4.6
39.2
62.8
47.4
1.9
47.7
55.2
36.3
-23.4
-34.3
-46.5
-30.5
-46.9
-30.5
Exceptional items
Tax Rate (%)
15.4
4.6
21.3
23.0
14.7
2.6
23.1
28.5
18.1
4.1
20.5
25.1
24.0
PAT
46.1
152.2
80.4
159.7
213.0
169.8
130.6
157.3
214.3
43.4
184.9
165.0
114.8
4.5
14.3
7.7
12.7
15.4
12.7
10.5
10.7
13.4
2.5
12.4
9.8
6.7
PAT Margin (%)
Minority Interest
Net Profit
EPS (|)
1.3
1.9
2.1
3.0
0.1
3.0
1.9
3.0
-1.9
0.3
0.1
-0.1
0.0
44.8
150.4
78.3
156.8
212.9
166.8
128.7
154.3
216.2
43.1
184.8
165.1
114.8
1.7
5.6
2.9
5.8
7.9
6.2
4.8
5.7
8.0
1.6
6.8
6.1
4.2
Source: Company, ICICIdirect.com Research
SWOT Analysis
Strengths- Prudent geographical mix covering high opportunity emerging
markets as well as developed markets. Presence in niche therapies in the
US such as oral contraceptives, dermatology which is relatively less
crowded. Time tested R&D focused business model with a portfolio of
Innovative products. Well placed to monetise the R&D pipeline in with
product in various stages of completion.
Weakness- High debt level; Presence of substantial intangibles in the
Balance sheet. Higher R&D spends likely to put pressure on the margins.
Opportunities- In the US Generics space lot of opportunities are panning
out in the Oral Contraceptives and Respiratory space.
Threats- Increased USFDA scrutiny across the globe regarding cGMP
issues and consolidation in the US pharmacy space.
ICICI Securities Ltd | Retail Equity Research
Page 7
Conference call highlights
•
•
•
•
•
•
•
•
•
•
•
Gross debt and cash stood at ~| 3160 crore and ~| 406 crore
respectively in Q3FY15.
In Q3, the company has received 1 USFDA approval
(gPrilosec) and filed 4 products. Cumulatively, it has 94
products in the US and has 75 pending approvals including 33
Para IV application. It also expects to file 4 ANDA in Q4FY15.
It expects acceleration in the USFDA approvals from Q4
onwards. It has also taken some price hikes in the US.
R&D stood at | 176 crore in Q3 FY15 (10.4% of total sales).
The company has spent ~US$ 40-45 million in R&D for
innovative products in CY14. Going ahead, the proportion of
Innovative R&D in the total R&D is likely to go down.
CIS is contributing 50-55% of the company’s total ROW sales.
Venezuela is contributing 25-30% of company’s total Latin
American sales.
In Russia, the company has not taken any price hike despite
sharp Rouble depreciation. During the quarter the company
has received 3-4 products approval including gSeretide (for
asthma; US$ 60-70 million sales). The company is holding
back some Russian sales to avoid bad-debts.
Russian margins are normally above the company’s blended
margins.
The company has also filed gSeretide in 4-5 other emerging
markets and plans to file 5-6 more respiratory products in
these markets.
It expects strong European sales from Q4FY15 mainly due to
launches of 3-4 products including gTarka
The company expects ~18% growth in the domestic market.
In Latin America, despite currency volatility it expects 10-15%
growth due to incremental product launches.
Capex expected to be ~| 500 crore for FY16.
Market Share: Domestic
Cardiac
Respiratory
Anti-Infectives
Anti-Diabetic
Gynacology
Derma
MAT Dec 2014 (%)
3.81
3.82
1.81
1.97
1.42
8.04
MAT Dec 2013 (%)
3.50
3.58
1.63
1.50
1.48
8.16
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research
Page 8
Valuation
After languishing for few quarters, the US franchisee is likely to get some
momentum, thanks to the interesting approvals lined up in FY16-17.
Taking into account the product pipeline (including 33 Para IVs) the
prospects are certainly to improve in FY16E and FY17E if indeed the
momentum improves. Indian formulations growth is likely to remain at
elevated level (Q3 was slightly muted) going ahead. Other geographies
such as Europe, Latin America are emerging as new growth drivers but
these geographies are slightly lumpy in nature. Respiratory launches in
Russia despite adversaries bode well for ROW traction. We have valued
the company at | 824 on SOTP basis- We ascribe | 817 to base business
based on 18x FY17E EPS of | 45.4 and we have calculated NPV of | 7 for
gZetia.
19.0x
Dec-14
Oct-13
Mar-13
Aug-12
Jan-12
21.4x
May-14
23.8x
Jun-11
Nov-10
Apr-10
Sep-09
Feb-09
Jul-08
May-07
Dec-07
26.2x
Dec-14
Price
May-14
Oct-06
1000
900
800
700
600
500
400
300
200
100
0
Mar-06
|
Exhibit 9: One year forward PE
16.6x
[
Source: Company, ICICIdirect.com Research
Exhibit 10: One year forward PE of company vs. BSE Healthcare Index
60
50
(x)
40
30
20
10
0
Oct-13
Mar-13
Aug-12
Jan-12
Jun-11
Nov-10
Apr-10
Sep-09
Feb-09
Jul-08
Dec-07
May-07
Oct-06
Mar-06
Glenmark Pharma
BSE Healthcare Index
Source: Company, ICICIdirect.com Research
Exhibit 11: Valuation
FY14
FY15E
FY16E
FY17E
Revenues
(| crore)
6007
6624
7890
9286
Growth
(%)
49
10
19
18
EPS
(|)
20.0
22.1
34.7
45.4
Growth
(%)
17.9
10.4
56.8
45.4
P/E EV/EBITDA
(x)
(X)
31.8
15.0
28.8
16.1
18.4
11.8
14.0
9.2
RoNW
(%)
18.3
17.7
23.1
25.1
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research
Page 9
RoCE
(%)
16.0
17.4
23.8
28.6
Company snapshot
Target Price: | 824
900
800
700
600
500
400
300
200
100
Jan-16
Oct-15
Jul-15
Apr-15
Jan-15
Oct-14
Jul-14
Apr-14
Jan-14
Oct-13
Jul-13
Apr-13
Jan-13
Oct-12
Jul-12
Apr-12
Jan-12
Oct-11
Jul-11
Apr-11
Jan-11
Oct-10
Jul-10
Apr-10
Jan-10
0
Source: Bloomberg, Company, ICICIdirect.com Research
Key events
Date
Aug-09
Event
Forest & Glenmark Pharma announce Phase IIb results for Oglemilast. The molecule did not show satisfactory results compare to its Placebo.
Oct-09
Launches four products in the UK market through its subsidiary Glenmark Generics Europe.
Mar-10
Receives USFDA approval for its new drug application for Oxycodone Hydrochloride capsules and liquid solutions filed as an NDA with USFDA under 505b2 route.
May-10
Enters into an agreement with Sanofi to out-license its GRC 15300 molecule. Receives US$ 20 million as an upfront payment.
Jan-11
Sanofi & Abbott win patent litigation case of generic Tarka. A Federal jury asks Glenmark to pay US$ 16 million as damages for launching at risk in the US market.
Apr-11
Enters into an exclusive agreement with a Canadian base company ImmanenceIntegrale Dermo Correction (IDC) to market high end dermatology products in eight
countries including India & Brazil.
Out-licenses monoclonal antibody GBR 500 to Sanofi. Receives US$ 50 million as upfront payment.
May-11
Aug-12
Jul-13
The International Center for Dispute resolution rules in favor of Glenmark on the arbitration claim it filed against Napo Pharma. Glenmark will have rights to develop,
commercialise and distribute Crofelemer in 140 emerging markets.
Conforms filing of ANDA for Lacosamide tablets and oral solutions with the USFDA under Para IV certification.
Mar-14
Provided | 213 crore for Tarka liability
Jan-15
Company has received shareholders' nod to raise up to $300 million (around Rs 1,890 crore) through issue of securities.
Source: Company, ICICIdirect.com Research
Top 10 Shareholders
Rank
1
2
3
4
5
6
7
8
9
10
Shareholding Pattern
Name
Saldanha Family Trust
Life Insurance Corporation of India
OppenheimerFunds, Inc.
HSBC Global Asset Management (Hong Kong) Limited
Capital International, Inc.
Bellevue Asset Management AG
Macquarie Investment Management Ltd.
Capital Research Global Investors
The Vanguard Group, Inc.
General Insurance Corporation of India
Latest Filing Date % O/S Position (m)n Change (m)
31-Dec-14 47.27
128.2
0.0
31-Dec-14 3.37
9.2
-0.2
31-Dec-14 2.06
5.6
0.0
31-Dec-14 1.82
5.0
-0.6
30-Sep-14 1.44
3.9
-0.1
31-Jul-13 1.33
3.6
3.6
30-Sep-14 1.24
3.4
0.3
31-Dec-14 1.22
3.3
-0.7
31-Jan-15 1.07
2.9
0.0
31-Dec-14 1.05
2.9
-0.1
(in %)
Promoter
FII
DII
Others
Dec-13 Mar-14 Jun-14 Sep-14 Dec-14
48.3
48.3
48.3
48.3
48.3
33.1
33.2
34.4
35.1
34.6
7.5
7.8
6.8
5.9
6.4
11.1
10.7
10.5
10.7
10.7
Source: Reuters, ICICIdirect.com Research
Recent Activity
Buys
Investor name
Bellevue Asset Management AG
APG Asset Management
Baron Capital Management, Inc.
Wasatch Advisors, Inc.
Tata Asset Management Limited
Value
34.13m
29.36m
12.53m
12.45m
12.23m
Shares
3.60m
2.40m
1.03m
1.02m
1.00m
Sells
Investor name
ICICI Prudential Asset Management Co. Ltd.
RCM Asia Pacific Ltd.
Capital Research Global Investors
HSBC Global Asset Management (Hong Kong) Limited
William Blair & Company, L.L.C.
Value
-11.56m
-8.05m
-7.95m
-7.47m
-6.52m
Shares
-0.95m
-0.68m
-0.66m
-0.61m
-0.56m
Source: Reuters, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research
Page 10
Financial summary
Profit and loss statement
(Year-end March)
Revenues
Growth (%)
Raw Material Expenses
Employee Expenses
R & D cost
Other expenditure
Total Operating Expenditure
EBITDA
Growth (%)
Depreciation
Interest
Other Income
PBT
EO
Total Tax
Profit After Tax
MI
Net Profit
Growth (%)
EPS (|)
| Crore
FY14
6,007.3
49.4
1,873.0
1,026.1
538.6
1,259.1
4,696.9
1,310.4
54.7
216.8
188.6
9.8
914.8
217.5
151.3
546.0
3.3
542.6
17.9
20.0
FY15E
6,623.5
10.3
2,119.3
1,295.0
625.7
1,340.2
5,380.2
1,243.3
-5.1
270.3
203.3
9.6
779.3
0.0
180.1
599.2
-0.1
599.2
10.4
22.1
FY16E
7,890.4
19.1
2,524.3
1,554.0
749.4
1,380.5
6,208.1
1,682.3
35.3
285.6
196.1
12.0
1,212.5
0.0
272.8
939.7
-0.1
939.8
56.8
34.7
FY17E
9,286.0
17.7
2,924.5
1,808.4
882.0
1,578.3
7,193.1
2,092.9
24.4
309.5
170.1
12.0
1,625.3
0.0
365.7
1,259.6
28.1
1,231.5
31.0
45.4
Source: Company, ICICIdirect.com Research
Cash flow statement
(Year-end March)
Profit after Tax
Add: Depreciation
Inc/(dec) in CL and Provisions
(Inc)/dec in Current Assets
Others
CF from operating activities
(Inc)/dec in Investments
(Inc)/dec in Fixed Assets
Inc/(dec) deffered tax liability
(Inc)/dec deffered tax liability
CF from investing activities
Issue/(Buy back) of Equity
Inc/(dec) in loan funds
Dividend paid & dividend tax
Inc/(dec) MI
Others
CF from financing activities
Net Cash flow
Opening Cash
Closing Cash
| Crore
FY14
546
217
721
-839
0
644.4
0
-484
30
-164
-618.1
0
502
-54
-11
-271
165.7
192
611
803.0
FY15E
599
270
200
-650
0
419.3
0
-460
0
0
-460.0
0
-100
-95
0
-111
-306.0
-347
803
456.3
FY16E
940
286
93
-378
0
940.7
0
-500
0
0
-500.0
0
-300
-108
0
-141
-549.2
-109
456
347.7
FY17E
1,260
309
435
-889
0
1,114.9
0
-300
0
0
-300.0
0
-500
-108
0
-206
-814.7
0
348
347.9
FY14
FY15E
FY16E
FY17E
20.0
28.0
110.0
2.0
29.6
22.1
32.1
124.5
3.5
16.8
34.7
45.2
150.0
4.0
12.8
45.4
56.8
184.8
4.0
12.8
21.8
15.2
9.0
131
57
120
18.8
11.8
9.0
130
80
120
21.3
15.4
11.9
110
75
110
22.5
17.5
13.3
110
75
110
18.3
16.0
21.3
17.7
17.4
17.5
23.1
23.8
21.4
25.1
28.6
24.6
31.8
15.0
3.3
2.9
5.8
28.8
16.1
3.0
2.6
5.1
18.4
11.8
2.5
2.2
4.2
14.0
9.2
2.1
1.9
3.4
2.5
1.1
2.2
1.8
2.5
0.9
2.2
1.5
1.7
0.7
2.2
1.5
1.1
0.5
2.2
1.5
Source: Company, ICICIdirect.com Research
Balance sheet
| Crore
(Year-end March)
Liabilities
Equity Capital
Reserve and Surplus
Total Shareholders funds
Total Debt
Deferred Tax Liability
Minority Interest
Total Liabilities
FY14
FY15E
FY16E
FY17E
27.1
2,956.5
2,983.7
3,267.0
207.1
13.3
6,471.0
27.1
3,349.7
3,376.8
3,167.0
207.1
13.3
6,764.2
27.1
4,040.2
4,067.3
2,867.0
207.1
13.3
7,154.7
27.1
4,985.1
5,012.2
2,367.0
207.1
13.3
7,599.6
Assets
Gross Block
Less: Acc Depreciation
Net Block
Capital WIP
Total Fixed Assets
Investments
Inventory
Debtors
Loans and Advances
Other Current Assets
Cash
Total Current Assets
Creditors
Provisions
Total Current Liabilities
Net Current Assets
Differed tax assets
Application of Funds
3,632.6
743.0
2,889.7
206.2
3,095.9
18.1
932.9
2,156.3
906.4
0.0
803.0
4,798.7
1,903.0
260.0
2,163.0
2,635.7
721.3
6,471.0
3,892.6
1,013.2
2,879.4
406.2
3,285.6
18.1
1,443.7
2,346.0
856.3
0.0
456.3
5,102.2
2,165.5
197.6
2,363.1
2,739.1
721.3
6,764.2
4,292.6
1,298.9
2,993.8
506.2
3,500.0
18.1
1,620.9
2,377.3
1,025.5
0.0
347.7
5,371.4
2,377.3
78.9
2,456.2
2,915.2
721.3
7,154.7
4,492.6
1,608.3
2,884.3
606.2
3,490.5
18.1
1,907.7
2,797.9
1,206.9
0.0
347.9
6,260.4
2,797.9
92.8
2,890.8
3,369.6
721.3
7,599.6
Source: Company, ICICIdirect.com Research
Key ratios
(Year-end March)
Per share data (|)
EPS
Cash EPS
BV
DPS
Cash Per Share
Operating Ratios (%)
EBITDA margins
PBT margins
Net Profit margins
Debtor days
Inventory days
Creditor days
Return Ratios (%)
RoE
RoCE
RoIC
Valuation Ratios (x)
P/E
EV / EBITDA
EV / Revenues
Market Cap / Revenues
Price to Book Value
Solvency Ratios
Debt/EBITDA
Debt / Equity
Current Ratio
Quick Ratio
Source: Company, ICICIdirect.com Research
.
ICICI Securities Ltd | Retail Equity Research
Page 11
ICICIdirect.com coverage universe (Healthcare)
ICICIdirect Healthcare coverage Universe
I-Direct
CMP TP
Rating M Cap
EPS (|)
PE(x)
EV/EBITDA (x)
RoCE (%)
RoNW (%)
Company
Code
(|)
(|)
(| Cr)
FY14 FY15E FY16E FY14 FY15E FY16E FY14 FY15E FY16E FY14 FY15E FY16E FY14 FY15E FY16E
Ajanta Pharma
AJAPHA 2517 3220 BUY
8820.5 66.2 75.0 85.6 38.0 33.6 29.4 24.0 20.9 17.2 44.9 40.6 38.1 39.4 32.8 28.9
Apollo Hospitals
APOHOS
1295 1075 HOLD
17951.7
22.8
27.5
35.1
56.9
47.2
36.9
28.1
24.0
18.2
11.6
12.7
14.9
10.6
Aurobindo Pharma
AURPHA
1124 1303 HOLD
32672.9
47.3
57.4
70.5
23.8
19.6
15.9
17.0
14.0
11.4
24.1
23.4
24.4
31.3
11.8 13.58
31.6 28.65
Biocon
BIOCON
420.5
410 HOLD
8378.7
20.7
20.0
22.6
20.3
21.0
18.6
12.4
12.4
10.9
13.4
11.6
12.9
13.7
12.3
Cadila Healthcare
CADHEA
1545 1634 HOLD
31520.0
39.2
51.1
66.2
39.4
30.2
23.3
28.0
20.9
16.3
15.9
19.0
21.7
23.4
24.6
25.4
Cipla
CIPLA
660.7
585 HOLD
52850.1
17.3
15.9
21.7
38.2
41.5
30.4
25.1
22.8
18.3
15.5
14.8
17.2
13.8
11.5
13.7
Divi's Laboratories
DIVLAB
1644 1633 HOLD
21744.2
56.0
62.4
81.7
29.4
26.3
20.1
21.3
18.1
15.0
29.6
28.1
29.7
26.1
23.2
25.1
Dr Reddy's Labs
DRREDD
3237 3332 HOLD
56545.6 126.7 128.3 151.0
26.3
26.0
22.1
17.1
15.8
13.9
19.2
18.7
20.1
23.7
19.9
19.5
Glenmark Pharma
GLEPHA
765
824 HOLD
20193.6
20.0
22.1
34.7
38.2
34.6
22.1
17.3
18.4
12.0
16.0
17.4
23.8
18.3
17.7
23.1
Indoco Remedies
INDREM
319.7
375 BUY
2935.1
6.3
9.5
13.3
50.9
33.7
24.0
24.9
16.9
13.1
16.6
21.8
28.1
12.6
16.4
19.4
Ipca Laboratories
IPCLAB
670.2
16.0
Jubilant Life Sciences
VAMORG 155.3
Lupin
LUPIN
12.9
622 HOLD
8425.7
37.9
25.6
31.8
17.7
26.2
21.1
11.0
14.5
14.0
27.6
16.1
17.8
24.4
14.7
138 SELL
2463.6
6.8
-6.5
20.0
22.7 -24.0
7.8
6.3
11.4
5.5
10.1
4.5
7.6
4.2
-3.5
7.6
1618 1866 BUY
72401.8
41.0
54.4
61.0
39.5
26.5
24.9
19.0
17.1
34.5
34.7
32.0
26.5
27.4
24.6
Natco Pharma
NATPHA
1402 1354 HOLD
Sun Pharma
SUNPHA
923.6 1036 BUY
Torrent Pharma
TORPHA
1152 1165 HOLD
Unichem Laboratories
UNILAB
215
206 HOLD
29.7
4643.5
30.3
32.5
44.9
36.3
33.8
24.4
27.2
22.5
17.9
15.3
16.7
18.7
14.1
13.5
16.1
190580.5
29.0
34.8
39.9
31.8
26.5
23.2
19.4
18.8
16.0
32.4
31.2
28.8
27.0
25.3
23.1
19413.5
39.2
47.2
50.4
29.4
24.4
22.9
20.6
18.3
14.7
28.5
21.4
26.7
34.9
32.4
28.0
1946.2
18.7
6.4
13.2
11.5
33.9
16.3
10.8
17.9
11.1
15.7
6.5
12.8
20.7
7.1
14.0
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research
Page 12
RATING RATIONALE
ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns
ratings to its stocks according to their notional target price vs. current market price and then categorises them
as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional
target price is defined as the analysts' valuation for a stock.
Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction;
Buy: >10%/15% for large caps/midcaps, respectively;
Hold: Up to +/-10%;
Sell: -10% or more;
Pankaj Pandey
Head – Research
[email protected]
ICICIdirect.com Research Desk,
ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No 7, MIDC,
Andheri (East)
Mumbai – 400 093
[email protected]
ICICI Securities Ltd | Retail Equity Research
Page 13
ANALYST CERTIFICATION
We /I, Siddhant Khandekar, CA INTER and Mitesh Shah, MS (finance), Nandan Kamat MBA Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed
in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific
recommendation(s) or view(s) in this report.
Terms & conditions and other disclosures:
ICICI Securities Limited (ICICI Securities) is a full-service, integrated investment banking and is, inter alia, engaged in the business of stock brokering and distribution of financial products. ICICI Securities is
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ICICI Securities Ltd | Retail Equity Research
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