Company Report | Q1FY12 Result Update

LONG TERM INVESTMENT CALL

28 July 2011 Industry CMP (INR) Target (INR) 52 week High/Low (INR) Market Cap (INR BN) 3M Avg. Daily Volumes (000) Pharma 362 Under review 390/242 89.3 775.8 Q1FY12 Result Highlights

Under Review

Glenmark surprised the street by its Q1FY12 results which were much better than the street expectations. The strong set of numbers was backed by the remarkable growth in its generics business (contributing 39% to the total income) and the speciality business (contributing 60% to the total income). Glenmark reported a growth of 27% YoY in the total income that came in at INR 8.7 bn. The major contributor to the revenue growth is the speciality business which grew by 28%. US generic business that contributes 30% to the total income reported a growth of 37%. India business (contributing 26% to total income) grew by 20% which was backed by the increase in market share of key therapeutic segments like Cardiac, Respiratory, Diabetes, Anti infective and Derma. Also there was a sharp increase in the out licensing income received from Sanofi for GBR 500 which stood at INR 1.1 bn. EBITDA margin excluding the onetime licensing income came in at 24.5% with an expansion of 45 bps led by the decrease in raw material costs. Adj. EBITDA stood at INR 1856 mn with a growth of 30%. Adj.PAT grew by 22% with PATM of 15%. Going Ahead Glenmark received the upfront payment of USD 15 mn from Salix as a part of its USD 21.6 mn out licensing deal. Glenmark is expected to use the payment to upgrade its manufacturing facilities to meet Salix's anticipated increased requirements in demand for Crofelemer. Glenmark is expected to launch its less competitive products, Malerone by Q3FY12 and Cutivate by Q4FY12. Glenmark has a strong R&D pipeline of 5NCE and NBE molecules which are under various stages of development.

Shareholding Pattern (%)

Stock Performance

Performance (%) 1 Month 8 Glenmark 2 Nifty

3 Months 12 -5

1 Year 19 3

* Source: Bloomberg, Unicon Research

With a strong pipeline of products in US, Glenmark is expecting to launch 7-10 new products per year which would lead to a healthy growth in the revenue. Currently the ANDA count of the company stands at 109 filings of which 69 are approved and 40 are pending for approval. Outlook & Valuation With a consistent growth in its domestic formulation business and a strong performance expected from US generic business we rate Glenmark to be a potentially high value stock. However having a positive stance on the company we keep the price target under review.

Wealth Research, Unicon Financial Intermediaries Pvt Ltd. Email: wealthresearch@unicon.in

Financials
(INR in mn)

Revenue Break up
(INR in mn)

Particulars Total Income from Operations Licensing Income (one time ) Base Income Raw Materials % of sales Employee Expense % of sales Other Expenses % of sales Total expenditure EBITDA EBITDAM % Adj EBITDA Adj EBITDAM % Other Income Interest Depreciation PBT Tax Tax Incidence Reported PAT Adjusted PAT PATM % Adj. PATM % EPS Adj EPS
Source: Company, Unicon Research *Consolidated

Q1FY12

Q1FY11

% Growth

Particulars India

Q1FY12 2253.8 1046.8 591.9 215.1 4107.7 1112.3 5220.0 2511.6 175.4 29.0 645.6 3361.6 101.0 8682.6

Q1FY11 1877.6 733.4 366.2 211.9 3189.0 895.1 4084.1 1829.9 80.5 75.3 633.9 2619.6 114.0 6817.7

% Growth 20.0 42.7 61.7 1.5 28.8 24.3 27.8 37.2 117.9 -61.5 1.9 28.3 -11.4 27.4

8684.7 1112.3 7572.3 2307.8 30.5 1346.3 17.8 2062.0 27.2 5716.1 2968.6 39.2 1856.2 24.5 123.4 408.1 263.8 2420.0 318.9 13.2 2101.1 1135.6 24.2 15.0 7.77 4.20

6848.5 895.1 5953.4 1905.5 32.0 1054.2 17.7 1565.6 26.3 4525.3 2323.2 39.0 1428.1 24.0 99.6 369.6 230.3 1822.9 117.5 6.4 1705.4 928.5 24.9 15.6 6.31 3.43

26.8

ROW Latin America Europe Total Specialty Formulation Out- Licensing Income Total Specialty Business US Europe Latin America API Total Generics Business Others Total Revenue

27.2 21.1 27.7 31.7 26.3 27.8

30.0

23.8 10.4 14.5 32.8 171.4 23.2 22.3

Wealth Research, Unicon Financial Intermediaries Pvt Ltd. Email: wealthresearch@unicon.in

Unicon Investment Ranking Methodology

Rating Return Range Buy >= 20% Accumulate 10% to 20% Hold -10% to 10% Reduce -10% to -20% Sell <= -20%

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Wealth Research, Unicon Financial Intermediaries Pvt Ltd. Email: wealthresearch@unicon.in