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Friday, March 4, 2011

Stock analysis - Glenmark Pharmaceuticals

Stock analysis of a large cap stock, Glenmark Pharmaceuticals Limited (GPL). Check out from medium to long term investment perspective.

Glenmark Pharmaceuticals is an India-based pharmaceutical company engaged in R&D of new molecules. Glenmark Pharma is focused in the areas of inflammation, including asthma/ chronic obstructive pulmonary disease (COPD), metabolic disorders, dermatology, anti-infectives, respiratory, gynecology, pediatrics, diabetics, Oncology. The Company has 12 manufacturing facilities in four countries that lists India, Latin America, Central Eastern Europe and Semi Regulated Markets of Africa/Asia/ Commonwealth of Independent States (CIS). It also has five R&D centers, three in India and two overseas.

Company also has good presence in US generic drugs market on it’s own and on partnership model. Company’s business in US is growing at very healthy growth rates. Revenues there have grown at CAGR of 89% in past 4 years. Moreover, company is focusing on specific niche areas in US with lesser competition that would further fuel the growth.

Glenmark pharma is also concentrating on Europian markets. They have acquired a Czech company Medicamenta which operates in Czech republic and Slovakia with branded generic drugs. Company has entered in Romania, Bulgaria, Poland and central, eastern and western European countries.

In Indian pharmaceutical markets, Glenmark is one of the very strong players with R&D capabilities and products at par with Ranbaxy, Dr. Reddy’s and SUN pharma. Dermatology has been the strong niche for Glenmark in India and it is carrying the same strength in international markets too.

Stock valuation

Considering the past growth records of company, we can expect that company sales revenue would grow at ~20% (CAGR) for next 3 years. Net profits for company had grown at over 20% CAGR. With acquisitions in Europe and growth with new product development in pipeline, we can safely expect net profits to grow at least at CAGR 25% for next 3 years. The EPS for FY 12 and FY 13 can safely be estimated at Rs.20 and Rs. 25 against full year estimated EPS of 16 in FY11.

At current stock price of Rs. 300, the stock trades at P/E of 10 times estimated FY13 EPS. You may buy stocks of Glenmark for 2 years with target price of Rs. 400

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