7 February 2021
3QFY21 Results Update | Sector: Healthcare
GSK Pharma
Neutral
Estimate change
TP change
Rating change
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
GLXO IN
169
242.5 / 3.4
1805 / 1033
-15/-38/-19
CMP: INR1,431
TP: INR1,500 (+5%)
Better operating leverage drives profitability
Better prospects with improving MR-Doctor-Patient connect
117
Financials & valuations (INR b)
Y/E MARCH
2021E 2022E 2023E
32.2 36.1 39.7
Sales
7.1
8.3
9.3
EBITDA
5.0
6.1
6.9
Adj. PAT
EBIT Margin (%)
19.4 20.9 21.5
29.8 36.0 40.8
Cons. Adj. EPS (INR)
5.7 20.7 13.5
EPS Gr. (%)
113.0 126.0 143.8
BV/Sh. (INR)
Ratios
Net D:E
-0.4 -0.5 -0.6
26.4 28.6 28.4
RoE (%)
27.2 30.3 30.5
RoCE (%)
Payout (%)
80.8 66.9 59.0
Valuations
48.2 39.9 35.2
P/E (x)
33.2 28.0 24.5
EV/EBITDA (x)
1.4
1.4
1.4
Div. Yield (%)
FCF Yield (%)
1.0
2.5
3.0
EV/Sales (x)
7.3
6.4
5.8
GSK Pharma (GLXO)’s 3QFY21 performance was better than estimated, with
an increase in sales driving higher profitability (on account of operating
leverage). With the intensity of YoY decline lower over the past two
quarters, GLXO exhibited low-double-digit YoY growth with the easing of the
lockdown and partly aided by the low base of the past year.
We increase our EPS estimates by 8%/3%/2% for FY21/FY22/FY23E,
factoring in strong recovery in key therapies and improving productivity. We
continue to value GLXO at 38x 12M forward earnings (25% discount to its
three-year average) to arrive at TP of INR1,500. Maintain Neutral.
GLXO’s revenues grew 10% YoY to INR8.6b (v/s est. of INR8.3b).
The gross margin (GM) expanded 110bp YoY to 59% on increased share of
higher value products.
The EBITDA margin expanded at a higher rate of 800bp YoY to 24% on
account of lower other expenditure (-400bpYoY as % of sales) and lower
employee cost (-280bp YoY as % of sales).
Accordingly, EBITDA grew 65% YoY to INR2.1b (v/s est. of INR1.8b).
Glaxo recognized an exceptional item of INR105m from the reversal of
provisions on account of the Zinetac recall (INR89m) and profit on the sale of
property (INR18m).
Adjusted for the same, PAT grew at a slower rate (v/s EBITDA) at 57% YoY to
INR1.5b (our estimate: INR1.2b) due to a higher tax rate for the quarter.
In 9MFY21, revenue declined 3% YoY to INR23.9b, but EBITDA/PAT grew
8%/4% YoY to INR5.2b/INR3.7b.
As per AIOCD data, GLXO’s top therapy Derma (~26% of overall sales) saw
healthy growth of ~15% YoY in 3QFY21, which contributed to overall growth.
Vaccines (17% of sales) posted flat sales YoY, while the Anti-Infective
therapy (26% of sales) saw a 5.5% decline in 3QFY21 (per AIOCD) – this
impacted overall growth, to some extent.
Betnovate/T Bact in the Derma segment saw 27%/24% YoY growth in
3QFY21. The Infanrix vaccine saw growth of 49% YoY in 3QFY21. Augmentin
(top Anti-Infective brand) declined 4% YoY for the quarter.
On a 12M basis, GLAXO took a price hike of 6.0%, offset (to some extent) by
volume decline of 13% on a YoY basis.
GLXO has recently launched products such as (a) Nucala (to treat pediatric
indication related to Hypereosinophilic syndrome), b) Fluarix Tetra (for the
prevention of Influenza), and c) Menveo (a vaccine to prevent
meningococcal disease).
Moreover, GLXO’s parent has an R&D pipeline of 35+ potential new
therapeutic drugs and 15 new vaccines under various stages of
development.
Strong sales growth drives earnings beat as operating leverage kicks in
Shareholding pattern (%)
As On
Promoter
DII
FII
Others
Key highlights
Dec-20 Sep-20 Dec-19
75.0
75.0
75.0
10.8
11.3
11.0
1.5
1.0
0.5
12.7
12.8
13.5
FII Includes depository receipts
Research Analyst: Tushar Manudhane
(Tushar.Manudhane@motilaloswal.com)
Bharat Hegde-CFA
(Bharat.Hegde@motilaloswal.com)
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Investors are advised to refer through important disclosures made at the last page of the Research Report.