Buy GlaxoSmithkline Pharmaceuticals for target of Rs.2407 - Motilal Oswal

GlaxoSmithKline Pharmaceuticals (GLXO IN; Mkt Cap USD4.2b, CMP Rs2,229, Buy)

One of the best plays on domestic formulation consumption Accelerating growth trajectory

GSK Pharma's management guided CY11 pharma revenue growth of 14-15% and EBITDA margin of 33-35%, led by launches & growth in existing products.

GSK Pharma's top-line growth over the next two years will be led by a focus on priority products, which are likely to sustain double-digit growth.

GSK's management has become more aggressive regarding new launches and has begun to launch branded generics to fill in gaps in its lifestyle portfolio.

GSK Pharma plans to launch 10-12 new products in CY11 including its parent's patented products, vaccines and branded generics.

We believe this growth trajectory will improve in the long term and after CY13, it is likely to outperform the average industry growth of 14-15%. GSK deserves premium valuations due to strong parentage (giving access to a large product pipeline), brand-building ability and likely positioning in the post-patent era. The stock is valued at 28.2x CY11E and 24.1x CY12E earnings. Maintain Buy with a target price of Rs2,407 (26x CY12E EPS).

Source : Equity Bulls

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