GlaxoSmithKline Pharma’s recurring net profit increase of just 8 per cent of Rs 125.43 crore, for the March 2009 quarter, is somewhat disappointing though the top line growth of 9.3 per cent to Rs 457 crore, is in line with expectations.
The management had indicated at the time of the firm’s annual results that revenues for CY09 should grow at around 10 per cent while operating profit margins should come in at 35 per cent. The OPM for the quarter at 36.6 percent is in line with the guidance though there has been a drop compared with the March quarter of 2008.
That’s partly because raw material costs were higher and the company also spent more on employees a part of its game plan to expand the sales team and promote new products. The net profit was boosted by acturial gains on employee benefits and profits from the sale of property. At Rs 1,169, the stock trades at 18 times estimated CY09 earnings.
The stock was one of the best performers in a weak market last year and is a good long term bet because the company has a strong product portfolio of anti-infectives (nearly 70 per cent of revenues) and vaccines.