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Pain and vaccine therapies hinder revenue growth…

…but market share gains continue in focus brands

* GSK Pharma (GLXO) delivered lower-than-expected result in 1QFY23 owing to muted sales in pain/hormone therapies and delay in recovery of vaccine therapy sales.

* We cut our EPS estimates for FY23/FY24 by 4%/5%, respectively, factoring in slower off-take of vaccine segment and elevated operational costs. We expect 9% earnings CAGR over FY22-24.

* We value GLXO at 37x 12M forward earnings to arrive at our TP of INR1,580. We maintain our Neutral rating given limited upside from current levels.

Superior product mix drives profitability on YoY basis

* GLXO’s revenue rose 4% YoY to INR7.5b (v/s est. of INR8.2b).

* Gross margin (GM) expanded 270bp YoY to 61.5% due to product mix.

* EBITDA margin improved at a lower rate of 150bp YoY to 20% because of higher other expenses (+430bp YoY as a % of sales) offset by lower employee cost (-310bp YoY as a % of sales).

* EBITDA grew 12.2% YoY to INR1.5b (v/s est. of INR1.9b)

* Adj. PAT rose 8.3% YoY to INR1.2b for the quarter (v/s est. of INR 1.4b)

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