GSK Pharma’s September 2009 quarter revenues, which rose 12 per cent year-on-year to Rs 513 crore, came pretty much in line with the Street’s expectations. With operating margins steady at 37.7 per cent, despite significantly higher expenses on an expanded sales force and marketing, the operating profit too increased 13 per cent.
However, the increase in the bottom line was not so impressive at just 9 per cent even with a lower tax rate of 32 per cent mainly due to a sharp drop in the other income. The double-digit growth in the top line was a broad based one with products across categories doing well and new products gaining acceptance.
Glaxo has a strong presence across several therapeutic segments not to mention a host of patent-protected products in the pipeline. The drug maker also has several vaccine launches in line and is, therefore, well poised to capture the growing spends on healthcare in the country.
On the financial front, the company has close to Rs 1,600 crore on the balance sheet which will allow it to pursue acquisitions or perhaps reward shareholders.
The stock has almost always traded at a premium to its peers in the industry largely because of a multinational parentage that gives it access to products, a strong balance sheet, steady cash flows and marketing presence.
However, the stock’s usually high dividend yield of 3 per cent has slipped slightly below that level. The premium should sustain but at Rs 1,591, valuations are somewhat stretched at 23 times estimated calendar 2010 earnings.