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We maintain a ‘buy’ rating on Glenmark Pharmaceuticals with a revised target of Rs 665 per share, valuing the stock at 18x FY16 EPS plus R18 DCF value for Crofelemer & Para-IV upsides. Glenmark's valuations of 19.6x FY15e and 16.1x FY16e EPS are reasonable in the light of the 18% earnings CAGR expected over FY14-FY16e. Post Q4FY14 results, we have increased our EPS estimates for FY15e/16e by 2% each, mainly due to lower tax-rate guidance.
Glenmark's Q4 operational performance was in line with our expectations. Reported sales grew 26% y-o-y to R1,680 crore (our estimate R1,600 crore) and ebitda grew 34% y-o-y to R360 crore (our estimate R350 crore).
Adjusted for low competition launches and out-licensing income, sales grew 27% y-o-y (our estimate: 21%), ebitda grew 32% (our estimate 30%), and PAT 17% (our estimate 11%). Core ebitda margin was 19.7%, lower than estimate of 20.4% on sub-optimal sales mix and high R&D spend (9.4% of sales). Adjusted PAT was higher than our estimate due to lower taxes.
The company guided 16-18% revenue growth for FY15, with ebitda at R1,500 crore. Growth would be strong in the emerging markets and Europe (on a low base), and recover to 18% in India. The US business may grow 12-15%, given the lack of clarity on new approvals. R&D expenses would be 9.5-10% and tax rate is likely to be 22%. Capex guidance stands at R450-500 crore. The management expects reduction in net debt.