Add GSK Pharma, target to Rs 1265: IIFL
IIFL has maintained its add rating on Glaxo Smithkline Pharma with a price target to Rs 1265 in its February 19, 2009 research report. “Glaxo’s 4QCY08 results were marginally below our expectations, mainly on lower EBIDTA margin, which declined 175 bps YoY and 869 bps QoQ to 28.4%. Revenues came in line with our expectation at Rs 3,685 million, up 8.7% YoY but down 19.4% QoQ (the December quarter has been historically weak for Glaxo). For the full year CY08, revenues grew 10.1% on like-to-like basis and adjusted net profit grew 12.1%. We believe that new product launches under patent protection will help Glaxo maintain its growth rates in the foreseeable future.
Glaxo has a lean asset base, with most of manufacturing being outsourced. Hence, the company also stands to gain from falling prices of intermediates and APIs. This, we believe, will help the company maintain its EBITDA margin at CY08 levels, even in the event of a slowdown in the domestic market. We maintain our ADD recommendation and raise our price target to Rs 1265,” says IIFL’s research report.
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