GSK Pharma - Largely in-line with estimates; Maintain 'SELL'; TP Rs1,880 - PINC Research

Q4CY11 Result Review - GSK Pharma

Largely in-line with estimates

GSK Pharma's Q4CY11 results were largely in-line with our estimates. The net sales grew by 15.4% YoY to Rs5.6bn on back of revival in the anti-infective and mass markets. The company also witnessed strong traction in speciality and vaccine segment. The gross margins contracted by 372bps YoY due to escalation in the raw material costs. However, EBITDA margins were in-line with our estimates at 31.5%, as the lower SG&A costs offset the impact of contracted gross margins. Consequently, the net profit came in at Rs1.4bn, growth of 20.5% YoY.

- Revival in key segments boost growth
- EBITDA margins expand on lower SG&A
- NPPP-2011 remains an overhang

VALUATIONS AND RECOMMENDATION

The stock is trading at an expensive valuation of 25.3x CY12E and 22.3x CY13E earnings. We maintain our 'SELL' recommendation on the stock on back of rich valuations and the overhang of the proposed NPPP-2011. We value the company at 22x one year forward earnings with a Target Price of Rs1,880.

Source : Equity Bulls

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