GSK Pharma Q1 Results Review - Superior Execution, Lower Raw Material Costs Drive Earnings: Motilal Oswal

Motilal Oswal Report

GlaxoSmithKline Pharmaceuticals Ltd. delivered better-than-expected Q1 FY25 performance. The robust growth in key brands, young potential brands, and vaccines aided by lower raw material costs led to higher-than-expected margins.

We raise our estimates by 3%/2% for FY25/FY26 to factor in:

1. the sustained benefits of lower raw material costs,

2. improved scale-up in brands like Nucala, and Treligy, and

3. strong volume off-take of Ceftum.

We value GSK Pharma at 47 times 12 months forward earnings to arrive at our target price of Rs 2,620.

Despite an increase in the share of portfolio under National List of Essential Medicines, GSK Pharma has shown healthy growth in respiratory brands, legacy brands (Augmentin, T-Bact, Calpol), as well as the vaccines segment.

Accordingly, we model a 9% earnings CAGR over FY24-26. However, we believe that the current valuation adequately factors in the upside in the earnings. Reiterate Neutral.

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