Glenmark enroute to becoming a large cap

FY13 revenue crosses Rs 5,000 cr on strong growth in domestic & US markets

Glenmark Pharmaceuticals is well on its way to becoming a large-cap stock, believe analysts. At an operational level, there's little to complain about, as revenues grew 25 per cent (both in the fourth quarter and for the full year) without compromising on margins. In Q4, the company reported a year-on-year growth of 25.3 per cent in consolidated sales to Rs 1,335 crore. Its net profit, however, took a hit, growing by 11 per cent in the fourth quarter due to forex losses. Excluding this, the growth in net profit is in line with estimates. For the full year, Glenmark's net profit grew 33.5 per cent to Rs 614 crore.

The company reported healthy growth across all its key markets. While the domestic formulations business grew at 32 per cent in Q4, the US generics business grew by 25 per cent and the speciality formulations business grew by 25 per cent. The speciality formulations growth does not include the outlicensing income. Glenmark has managed to grow profitably and has maintained operating margins at 20 per cent levels, despite some scepticism. Its cardiovascular and dermatological products are doing well in the India market, and in the US, its 10 over-the-counter products are successful. The company launched five new products and filed 18 abbreviated new drug applications in FY13 - seven of these in Q4 alone.

The pipeline of products in FY14 continues to be strong. The new fiscal could see some more action from the company, believe experts. Analysts believe there could be some positive news in the second or third quarters of FY14 as the outlicensing deal it signed with Sanofi could see some progress. Apart from this, the company has also received approval from the US Food and Drug Administration to launch Crofelemer, a drug used for HIV-associated diarrhea. The company is currently preparing to file for approvals to launch this medication in 140 countries.

According to Emkay Global, the Glenmark stock is ready to make a jump into the large cap space and this would have an impact on its valuations. The stock currently trades at 16.5 times its one-year forward earnings and analysts expect the price-earnings ratio to expand as the company grows. Large-cap pharma companies typically trade at 20 times earnings, and over the next year Glenmark could trade at a higher P/E if it maintains its growth trajectory.