Neutral GSK Pharma Ltd for the Target Rs 2,870 by Motilal Oswal Financial Services Ltd
Earnings in line; marketing spend rises with new launches Innovative portfolio scaling up steadily
* GlaxoSmithKline Pharmaceuticals (GLXO) delivered a better-than-expected revenue and in-line EBITDA/PAT in 1QFY27. Revenue tracked high-teen YoY growth after eight quarters of subdued growth. EBITDA growth was lower than revenue growth due to enhanced marketing efforts across oncology, adult and pediatric vaccines.
* The innovative portfolio contributed ~7% of 1QFY27 revenue (vs. 4% in 1QFY26) and continued to gain traction, driven by a strong uptake of existing brands and recent launches in oncology and respiratory therapy.
* In new launches, Arexv received marketing authorization in India, while Blenrep is expected to be commercialized in CY27. Notably, Shingrix Rx witnessed volume growth of 60% YoY.
* We slightly raise our estimates by 3% for FY28. We value GLXO at 35x 12- month forward earnings to arrive at a TP of INR2,870.
* We expect GLXO to deliver an 18% earnings CAGR over FY26-28, driven by continued expansion of its innovative portfolio, higher off-take of recently launched products, and increased investments in marketing and HCP engagement. Further, established brands and digital engagement should strengthen its General Medicines/Vaccines franchises. Having said this, considering the limited upside from the current levels, we maintain a Neutral stance on the stock.
EBITDA/PAT margin largely stable YoY
* Revenue increased 16.5% YoY to INR9.4b (est: INR8.8b).
* Gross margin (GM) expanded 80bp YoY to 65.1%.
* EBITDA margin expanded 30bp YoY to 31.5% (our est: 32.6%). The increase in other expenses (up 250bp as a % of sales) was offset by a decrease in employee expenses (down 200bp as % of sales).
* EBITDA grew 17.7% YoY to INR3b (vs. est. of INR2.9b).
* Adjusted PAT grew 15.7% YoY to INR2.4b (vs. est. of INR2.3b
Key highlights from the management commentary
* GLAXO expects to maintain the current EBITDA margin level of ~34% in FY27.
* Management indicated base business should grow by 8-10% on an annual basis. Combined with business from new products, management intends to grow by 13-14% on an overall basis over the medium term.
* Innovative portfolio contributed ~7% of 1QFY27 revenue (vs. 4% in 1QFY26).
* General medicine portfolio continued to grow in double digits in 1Q.
* Shingrix grew 65% YoY, driven by HCP engagement, and crossed INR1b+ in annual sales on MAT basis.
* Blended average PCPM stood at INR15-16 lac per MR.
* Investments remained elevated, with increased focus on oncology, adult vaccination and pediatric vaccination, alongside expansion of the targeted HCP base.
For More Research Reports : Click Here
For More Motilal Oswal Securities Ltd Disclaimer
http://www.motilaloswal.com/MOSLdisclaimer/disclaimer.html
SEBI Registration number is INH000000412
