Technology

For 4QFY2016, GlaxoSmithKline Pharmaceuticals (GSK)’s sales rose by Rs686cr,
up 11.8% yoy. On the operating front, the gross margin and the EBITDA margin
came in at 55.0% and 17.8% respectively V/s 57.1% and 19.4% during the
corresponding period of the previous year. The reported net profit for the quarter
thus came in at Rs106cr V/s Rs103cr in 4QFY2015, ie a yoy growth of 3.0%. The
Adj. net profit for the quarter came in at Rs95cr V/s Rs107cr in 4QFY2015, a dip of
10.6% yoy. We remain Neutral on the stock.
Results below our expectations: The company posted an unimpressive
performance for 4QFY2016. The company posted sales of Rs686cr (V/s `828cr
expected), a growth of 11.8% yoy. On the operating front, the gross margin and
the EBITDA margin came in at 55.0% and 17.8% respectively V/s 57.1% and
19.4% during the corresponding period of the previous year. The OPM came
lower than our expectations of 19.6%, weighed down by a lower gross margin on
a yoy basis. The reported net profit for the quarter thus came in at Rs106cr V/s
Rs103cr in 4QFY2015, ie a yoy growth of 3.0%. The Adj. net profit for the quarter
came in at Rs95cr V/s Rs107cr in 4QFY2015, a dip of 10.6% yoy.
Outlook and valuation: The company has a strong balance sheet with cash of
~Rs2,000cr, which could be used for future acquisitions or higher dividend
payouts. On the operational front, we expect the company’s net sales to post a
CAGR of 19.0% to Rs3,881cr and EPS to register a mere CAGR of 21.6% to Rs65.3
over FY2016–18E. We remain Neutral on the stock.

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