GlaxoSmithKline: Various small positives drive FV slightly up
NEUTRAL, Fair Value 1790p vs. 1760p (+7%)
At mid-session yesterday GSK reported Q1 sales and profits which were a touch higher than expected although with no significant differences. Revenues came out in line despite unexpected generic competition on Lamictal XR and Bactroban and historically low inventory levels for brands in the US. Core operating income was also in line although it is fair to report that higher COGS were offset by some currency gains booked in the other income line. In the end, the difference was made on the tax rate line as Q1 was below full-year guidance (22.4% vs 24%). Of note is also the improvement in working capital driven by inventory management. But the key mention of the call was confirmation that Lucozade and Ribena are for sale and the build-up of an Established Products portfolio for which all options are open including partnering or divestment.
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