Centrum Broking
GlaxoSmithKline Pharmaceuticals (Add)
CMP: ₹1,370.5
Target: ₹1,570
GSK Pharmaceutical’s Q4FY20 reported earnings ahead of our estimates. The earnings were better as gross margins continued to improve significantly, this quarter gross margins stood at 64 per cent versus 54.4 per cent vs 57.9 per cent. The improvement was largely attributable to price mix and portfolio optimisation. Accordingly we believe that both these elements could be sustainable over the coming years and could mean better gross margins.
The employee cost also increased by 17 per cent y-o-y and has certain element of one-time. EBITDA increased by 6 per cent y-o-y to ₹174 crore with EBITDA margins at 22.4 per cent, expanded by 60 bps y-o-y. Reported profit for the quarter was at ₹129 crore, increased 6.7 per cent y-o-y. The underlying sales growth adjusting for tail-end brand rationalisation and divestment was at 13 per cent y-o-y while the key focussed brands growth stood at 20 per cent y-o-y (both for vaccines and other focussed brands). Top brands continue to grow at +20 per cent.
Management maintains their guidance on sustaining double digit underlying growth and expects EBITDA margins to reach around 23-25 per cent going ahead.