Kotak keeps ACCUMULATE on Glenmark Pharma

Kotak keeps ACCUMULATE on Glenmark Pharma

The company reported consolidated revenues of Rs10.2 billion for H1FY08, an increase of 40.5% led by traction in specialty and generic business in developed markets. Net profit grew 76% to Rs2.33 billion.

The management has maintained its strong revenue and earning growth guidance for the next two years on the back of significant traction in revenues across the key geographies and increasing potential value in NCE/NBE research due to promising results during clinical studies.

We have fine-tuned our revenue and earning estimates marginally in the light of H1FY09 performance and management’s firm guidance.

We expect Glenmark to register 34.5% and 26.9% compounded growth in revenue and earnings over FY08-10E, driven by 37.9% compounded growth in core business and potential NCE milestones payments of $70 million each in FY09 and FY10, respectively.

The stock has witnessed sharp sell-off recently on the news of suspension of further clinical trial by Eli Lilly on Osteoarthritis pain molecule GRC-6211, which we believe, market over-reacted.

We believe valuations are attractive and still many catalyst exist in the near-to-medium term. We maintain ACCUMULATE.