scorecardresearch52-week low: Gland Pharma cracks 12%; brokerages remain mixed after Q1

52-week low: Gland Pharma cracks 12%; brokerages remain mixed after Q1 result

Updated: 21 Jul 2022, 02:15 PM IST
TL;DR.

  • Gland Pharma, which is a generic injectable-focused pharmaceutical company, reported a 26% year-on-year (YoY) fall in revenue from operations for Q1FY23 at 856.9 crore.

Gland Pharma's Q1FY23 results were below market expectations. Photo: PIxabay

Gland Pharma's Q1FY23 results were below market expectations. Photo: PIxabay

At first glance, it appears that investors felt extremely disappointed with the quarterly result of Gland Pharma as the stock cracked almost 12% to hit its fresh 52-week low of 2,180.10 in intraday trade on BSE on July 21 a day after the company released its June quarter result of the financial year 2023 (Q1FY23).

Gland Pharma, which is a generic injectable-focused pharmaceutical company, reported a 26% year-on-year (YoY) fall in revenue from operations for Q1FY23 at 856.9 crore. Profit after tax (PAT) fell 35% YoY to 229.2 crore.

EBITDA fell 31% YoY to 344.3 crore while EBITDA margin shrank to 37% in Q1FY23 against 41% in Q1FY22.

“While market demand for our products remained strong, continuing supply disruptions in the midst of challenging macro environment has impacted our growth for the first quarter of fiscal 2023," said Srinivas Sadu, MD & CEO of Gland Pharma.

"We ensured timely new product launches which are key to our sustainable business growth. In spite of pricing pressure in the US market and inflationary costs, we managed to improve our margin. We are continuously investing into our people, infrastructure and portfolio to expand our global footprint,” he added.

Brokerages remain mixed

The quarterly numbers of Gland Pharma disappointed some brokerage firms but some have kept faith in the stock and maintained buy calls considering the growth prospects of the company going ahead. 

Motilal Oswal Financial Services has maintained a 'buy' call on the stock with a target price of 3,000 while underscoring Gland Pharma delivered weak Q1FY23 results due to multiple headwinds such as supply constraints of certain ancillary materials, plant modification-led lower production and reduced scope of business for certain products in the Indian market.

Motilal Oswal has cut its earnings per share (EPS) estimates by 14% and 16% for FY23 and FY24, respectively, to factor in prolonged supply chain-related issues, a slowdown in India business, and higher opex.

"We value the stock at 33 times 12-month forward earnings to arrive at our target price of 3,000. There are operational hurdles over the near term. However, given product pipeline of complex injectables, consistent compliance track record, biologics-led additional growth lever and surplus cash for any inorganic opportunity, we believe Gland’s business model remains intact for better growth prospects over the next three years," Motilal Oswal said.

While Motilal Oswal has a buy call on the stock, Kotak Securities has retained a 'reduce' call on the stock. Kotak has cut the stock's target price to 2,325 from 2,800.

“Gland reported a dismal Q1FY23 performance due to continued supply disruptions and elevated costs. Gland, being a B2B generic player, caters to the relatively lower end of the global injectable market, thereby aggravating the supply challenges," Purvi Shah, DVP (Fundamental Research) – Pharma Analyst, Kotak Securities pointed out.

Shah added while these pressures will largely ease out in the second half of FY23, Gland has unveiled higher vulnerability in its CDMO (contract development and manufacturing organization) model versus peers.

"Long-term concerns on margins stay. We cut FY23-25E EPS by 11-13% to factor in lower sales (particularly in ROW), lower profit share in the US and higher costs. We also lower our target multiple from 28 times Mar-24 EPS to 25 times Jun-24 EPS to account for the higher vulnerability of Gland’s B2B generic model to supply disruptions compared to other CDMO peers, as evidenced over the past few months," said Shah.

According to a MintGenie poll, an average of 15 analysts have a ‘buy’ call on the stock.

Disclaimer: The views and recommendations made above are those of individual analysts or broking firms and not of MintGenie.

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First Published: 21 Jul 2022, 02:15 PM IST