GSK Pharma shares sink 8% as Q3 net profit tanks

The pharma company’s net profit declined 72 percent on year to Rs 46 crore. The bottomline also included exceptional expenses worth Rs 220 crore

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Shares of GlaxoSmithKline (GSK) Pharmaceuticals plunged over 8 percent in the opening trade on February 13 after the company reported a disappointing set of earnings for the December quarter.

The company’s net profit declined 72 percent on year to Rs 46 crore from Rs 165 crore in the year-ago period. The bottomline also included exceptional expenses worth Rs 220 crore related to the voluntary retirement scheme and other employees’ dues.

Excluding that, the company recorded a 19 percent increase in net profit from the year ago quarter.

Revenue, however, was largely flattish on year at Rs 805.3 crore againts Rs 802.3 crore in the corresponding period of the preceding fiscal. The marginal growth in revenue came despite the company facing an adverse impact of National List of Essential Medicines (NLEM) price caps in Q3.

At 9.22 am, GSK Pharma was trading at Rs 2,177.50 on the NSE.

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However, sluggish revenue growth, weak product mix and increased employee costs weighed on the company’s operational performance. The EBITDA margin contracted to 27.1 percent from 28.5 percent in the year-ago period.

Despite subdued earnings, brokerage firm Motilal Oswal Financial Services raised its earnings estimate for the drugmaker by 2-6 percent for FY24-26, driven by its industry outperformance in the general medicines category, increased traction in the innovative portfolio, and leveraging benefits from lower raw material costs.

“While GSK Pharma faced headwinds on account of the addition of products under the NLEM, it continues to implement efforts to improve business prospects,” the firm said.

MOFSL, however, also said the current valuation adequately captures the upside in earnings and retained its “neutral” call on the stock. The firm has a price target of Rs 2,200 for the stock.

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