Glenmark Pharmaceuticals’ (GNP) Q3FY16 sales grew 4%, while EBITDA remained flat (we have not adjusted for forex loss of Rs 270 million as this pertains to normal business) and PAT declined 23% y-o-y (high tax rate): North America (34% of sales) grew 13% y-o-y in constant currency, but was flat q-o-q as base business continued to face price pressure while new launches take time to ramp up; price hikes in Mupirocin boosting company margin; India (27% of sales) grew 13% as Teneligliptin only marginally offset Sitagliptin’s loss; LatAm plummeted 47% y-o-y as GNP has begun de-focusing on this business.
Net debt jumped Rs 3.5 billion q-o-q as the company paid Tarka liabilities (Rs 2.08 billion) and some trade liabilites during the quarter, and also due to MTM impact on loans (Rs 1.98 billion). While GNP has stopped shipping to Venezuelan subsidiary in November, net outstanding cash in country is $20 million.
We expect a much better FY17 on launches like Zetia and Nitroglycerin.Stock valuation at 13x FY18E EPS reflects the concerns on balance sheet and increasing debt every quarter. We maintain ‘hold/SP’ with target price of Rs 920.