GSK Pharma's Q1CY11 outcomes were a mixed bag as increase on the net sales front disappointed but recurring profit was ahead of the estimation on account of inferior tax rate.

The stock is trading at 29.7x CY11E and 26.2x CY12E earnings.

With the majority of positives factored in and lack of conviction on the inorganic growth front, it is better to sell the stock with a target price of Rs 1,809.

Sales growth disheartens; recurring profit increased by low tax rate GSK Pharma reported net sales of Rs 6,029 million, up 11.4% and was below the estimates of Rs 6,249mn. But, OPM at 35.7% came in at positive surprise on account of lower than anticipated employee cost.

Further, Recurring profit grew by strong 15.6% to Rs 1,863 mn on back of lower tax rate (29.6%). Exceptional items dampens reported net profit Post the Supreme Court order on Betamethasone bulk drug and formulations, GSK Pharma has provided for Rs 1,859mn (Rs22/share) which also includes net interest cost of Rs 1,610 mn.

However, GSK Pharma is still contesting the interest amount claimed by Govt. Sale of Thane land could be in the offing As per media reports, GSK Pharma has proposed VRS for its 349 workers at Pokhran Road 2 facility in Thane there by leading to speculation that 50-acre plot is up for sale.

In case the company plans to sell the Thane land it could fetch a net consideration upto Rs 4.5bn.