Glenmark Reports Strong Q3 Numbers

Glenmark Pharma has reported a hefty 375% jump in its net profit to Rs 213 crore on a YoY basis for the Dec 2012 quarter. The market was expecting a net profit of Rs 181 crore in the third quarter of the FY13. Buoyed by the strong performance in all its business segments across major geographies, the company has also reported a 34% growth in its revenues to Rs 1381 crore. In the constant currency terms, this growth is at 26.5% which means that the company enjoyed the impact of the rupee depreciation during the quarter.

Specialty Business

The company, during the quarter, has reported a 31% YoY growth in its specialty business to Rs 735 crore. In India, it has again outperformed the domestic pharma market by reporting a YoY 30% growth in revenues. Decline in revenues from Europe was offset by the robust growth of 66.7% in the revenues from Rest of the world markets (Africa, Asia, Russia and CIS Region). Latin American revenues also grew by 17% on a YoY basis.

Out-Licensing Income

Out-Licensing revenues were very strong in the quarter after it entered in an agreement with forest laboratories to out-license its drug Crofelemer. Revenues from this segment in the quarter stood at Rs 49 crore against Rs 23.8 crore reported a year earlier.

Generics Business

Generics business too reported a 33% rise in its revenues to 581 crore. In the US market, its growth has remained at 37% while that in Latin America is even higher at 43%. The European generics revenue grew stronger by 29%. Active pharma ingredients business also grew by 19% in the quarter on a YoY basis.

Due to the strong growth as well as improved costs, its EBTIDA margins came in at 23% against 10% a year earlier and 21% in the Sep 2012 quarter. The finance cost stood at Rs 40 crore against Rs 36 crore a year earlier and Rs 38 crore reported in Sep quarter of the current fiscal.

Regulatory Approvals

On the regulatory activity front, the company has received a few approvals in the dermatology space in RoW and Latin American markets. It has also launched several products in the generics segment in Europe. In USA, it has filed 5 ANDAs and has received two approvals from USFDA in the quarter. In USA it has a total of 11 ANDAs filed in the first nine months and it is now marketing 83 generic drugs. It currently has 46 applications pending in various stages of the approvals which include 18 Paragraph IV applications which, if approved, will significantly increase its revenues.

With the strong results, the company has continued to report strong revenue traction in the first three quarters of FY13. The stock has outperformed with over 70% returns in the last one year. At the TTM price to earnings multiple of 22.3x, we still see an upside of 8-10% in the stock. We have already recommended this stock to our readers in our issue number 26 last year dated Dec 3, 2012. The scrip has returned 13% returns from the recommended price of Rs 437. Considering the high growth rates it is posting and a further upside, one can hold the stock with a target price of Rs 530 a piece.