GlaxoSmithKline Pharma: PAT Plunges 43% For Q1CY14

GlaxoSmithKline Pharmaceuticals, an India-based pharmaceuticals company, yesterday (17 April,2014) announced its March quarter financial result for CY14 after market hours. The company follows a cycle of January-December financial year. The result shows a weak financial performance by the company during this quarter of CY14. 

During Q1CY14, the topline of the company plunged by more than 4.24 per cent to Rs 609.85 crore as compared to the same quarter of previous year. On quarterly basis also, the topline has reduced by more than 4.30 per cent as compared to Q4CY13.

The EBITDA of the company stood at Rs 107.6 crore during Q1CY14 as compared to Rs 167.62 crore during Q1CY13, marking a fall of around 36 per cent as compared to the same quarter of the previous year. The EBITDA of the company during this quarter has plunged mainly due to increase in total expenses. The total expenses during this quarter has surged by around 7 per cent as compared the same quarter of the previous year. The total expenses of the company has increased mainly due to increase in consumption of raw material (up by 12 per cent Y-o-Y) and employees cost (up by 6 per cent Y-o-Y) during Q1CY14 as compared to same quarter of the previous year.

The noticeable point is that the operating margin during this quarter has reduced by 867 basis points to 17.64 per cent as compared to same quarter of previous year. The EBITDA margin has reduced mainly due to steep rise in total expenses as proportionate to fall in total income. The total income of the company has plunged by more than 4 per cent whereas the total expenses has surged by 7 per cent during this quarter as compared to the same quarter of previous year.

As far as profit is concerned, the company has posted a bottomline of Rs 96.54 crore during Q1CY14, marking a fall of around 43 per cent as compared to the same quarter of previous year. While the PAT margin during this quarter has reduced by 1070 basis points to 15.83 per cent as compared to the same quarter of previous year. The margin was low due to reduction in income from other sources. The income from other sources has reduced by around 42 per cent to Rs 44.88 crore during Q1CY14 as compared to Q1CY13. 

Commenting on the weak performance during this quarter the company said, “The quarter ended March 31, 2014, continued to see the impact of the revamped price control order, extending coverage to the National List of Essential Medicines (NLEM).”

Last year, the Department of Pharmaceuticals had notified that the Drugs (Price Control) Order 1995, which regulated the price of only 74 bulk drugs has now been replaced by Drugs Order 2013. Under this the prices of 348 medicines in the NLEM was brought under price control. This has of course impacted the profit of the company. 

On the valuation front, the company is trading at 49x of its trailing twelve months earnings. Whereas the industry is trading at P/E of 33x. So, it is clear that the stock is overvalued. Yesterday, on BSE, the stock opened at Rs 2510 and closed at Rs 2497. We, therefore, advise our investors, who are looking for short term investment, to stay away from this stock for the time being.