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GSK Standalone net sales grew by moderate 10% YoY in Q3'CY'12 to Rs 668.50 crore, whereas core Pharmaceuticals business grew by 11% for the same period. At operating level, margins bettered by 80 bps YoY to 30.5% and accordingly operating profit grew by 13% YoY to Rs 206.40 crore. After the 9% growth in other income to Rs 40.38 crore, PBIDT grew by 12% YoY to Rs 246.78 crore. But after the higher EO losses (pertain to rationalization initiatives relating to a manufacturing site) coupled with the marginal increase in effective tax rate despite marginal decline in depreciation, PAT grew by subdued 4% YoY to Rs 152.34 crore.
Sales Grew by 10%: Total revenues grew 10% YoY to Rs 675.99 crore for the quarter ended September 2012. The Company launched Zimivir for herpes treatment and also it has expanded its CNS portfolio by launching Ictacetam used in the treatment of epilepsy during the quarter.
Margins Improve: At Operating level, margins improved by 80 bps YoY to 30.5% on the back of sharp fall in the other expenses (340 bps YoY) despite the rise in consumption cost (190 bps YoY) and increase in staff cost (40 bps YoY) as percentage to sales and net of stock adjustments. Accordingly, operating profit grew by 13% YoY to Rs 206.40 crore. After the 9% growth in other income to Rs 40.38 crore, PBIDT grew by 246.78 crore.
Higher EO losses impact the PAT growth: After accounting to the meager depreciation Rs 4.84 crore (down by 1% YoY) and with higher EO losses at Rs 16.55 crore (as against mere 0.19 crore), PBT growth moderated to 5% YoY to Rs 225.39 crore. Further, after marginal 30 bps rise in the effective tax rate to 32.4%, PAT grew by 4% YoY to Rs 152.34 crore.
Nine Months Performance:
Net Sales grew by 10% YoY to Rs 1943.24 crore for the nine months ended September 2012. Notably, margins fell by 180 bps YoY to 31.6% and after this operating profit grew by moderate 4% YoY to Rs 621.88 crore. But after the 29% growth in other income to Rs 151.74 crore, PBIDT grew by 8% YoY to Rs 773.62 crore. With the 7% declined in depreciation to Rs 13.26 crore and after adjusting to the lower EO losses (Rs 118.53 crore vis-à-vis Rs 306.79 crore), PBT grew by sharp 62% YoY to Rs 641.83 crore. However, the sharp rise in effective tax rate by 560 bps YoY to 31.6% has curtailed the net profit growth to 49% YoY to Rs 438.75 crore.
Valuation:
- The scrip was down by 0.14% to Rs 1996.65 at BSE India on 09th November 2012 and currently trading at 26 times to the Q3'CY'12 EPS Rs 77.2.
Management Comments:
Commenting on the performance Dr. Hasit Joshipura, Managing Director, said "The vaccines business continues to record strong growth. The quarter also saw good growth across verticals, in particular, Specialties. Sales were impacted due to constraints of sterile manufacture owing to shutdown of one of the suppliers, as well as, on account of constraints at the Nashik facility. These constraints have since been resolved".
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