August 17, 2016 / 04:25 PM IST
Glenmark's (GNP) Q1 EBITDA growth (up 5% YoY) was in line with our estimate. Reported PAT was 17% higher than our estimatebut in-line when adjusted for MTM^ forex gain. Reported revenue growth of 18% YoY was led by US (18% YoY), India(10%), RoW (23%) and API (42%).Gross margin decline of 269 bps YoY coupled with spike in staff costs (30% YoY, led by R&D staff increase) pulled EBITDA margin down 230 bps to 19.5%. While we expect strong revenue growth (ex-gZetia) in US (16% in FY16-18 vs. 6% in FY14-16) to improve the margin, we remain cautious on Venezuela repatriation issues (~USD 45mn outstanding, paired with negligible sales) and increasing debt. We tweak our estimates but maintain HOLD with revised TP of Rs 900(19x FY18E coreEPS+ Rs 6 for novel R&D project + Rs 19 for one-time gZetia exclusivity) vs. Rs 915 earlier.
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