With improved prospects for the domestic pharma market, led by a rebound in acute segment sales, multinational companies with focus on India remain well placed. GlaxoSmithKline Pharmaceuticals Ltd's (GSK) performance for the quarter ended December is a testimony.
The company’s power brands continued to boost growth and profitability, with core legacy brands such as Calpol, Augmentin and Ceftum recording strong double-digit growth.
GSK Pharma said that while its promoted brands grew, vaccines business was impacted on account of the third wave of the pandemic. The same meant that the company's revenues for the quarter from continuing operations at ₹808 crores recorded a growth of just 2%.
However, there was a stronger improvement in profitability with Ebitda from continuing operations at ₹197 crores, recording a growth of 8%.
Analysts at ICICI Securities Ltd said that profitability was better even after adjusting for transfer of lodex and Ostocalcium brands to GSK Asia Private Ltd, mainly due to strong margin performance.
Ebitda margin of the continuing operations was up 140 basis points year-on-year to 24.2%, while adjusted net profit grew 16.2% YoY to ₹1527 crore.
Referring to secondary sales data from AIOCD, analysts at Motilal Oswal Financial Services Ltd (MOFSL) said that anti-infective, pain therapy, dermatology with 25%, 12%, 28% of overall sales, respectively saw a strong growth of 30%, 29%, 14% YoY in 3QFY22, respectively.
Among brands, Calpol in pain therapy saw 47% year-on-year growth. Betnovate N and T-Bact in dermatology products witnessed an 11% and 18% YoY growth respectively. Anti-bacterial Augmentin too grew 48% YoY in 3QFY22.
The strong growth in sales of products in the acute category kept the outlook strong for the company. Glaxo has also been focussing on new product introductions and growing its vaccine sales in India. The company said as this phase of the pandemic recedes and schools open up across the country, “we are witnessing a steady uptake in vaccination".
“Excluding transfer of brands, we expect GSK to report strong growth in both revenue and earnings in FY22 with healthy recovery in the acute segment and low base," said analysts at ICICI Securities Ltd. They expect 7.2% revenue and 17% net profit CAGR (compound annual growth) over FY21-FY24 driven by growth in power brands, traction in newly launched products and recovery in key therapies like vaccines, respiratory and vitamins and minerals.
While growth outlook remains strong, the valuations of the stock may be factoring in the positives, feel analysts. Unsurprisingly the stock closed 2.12% lower on Tuesday. At ₹1547, the stock is trading 39 times the FY23 earnings estimates of MOFSL. The brokerage firm maintains neutral ratings on the stock. Analysts at ICICI Securities also say that the current valuation already captures all near-term upsides.
