scorecardresearchGland Pharma: Should investors consider buying this pharma stock after

Gland Pharma: Should investors consider buying this pharma stock after losing 68% of its value?

Updated: 30 May 2023, 10:06 AM IST
TL;DR.

Axis Securities remains optimistic about the company's growth prospects, citing the positive performance of injectable companies in the US market.

While maintaining a 'hold' rating on the stock, the brokerage has revised the target price to  <span class='webrupee'>₹</span>1,400 per share, down from the previous target of  <span class='webrupee'>₹</span>1,500.

While maintaining a 'hold' rating on the stock, the brokerage has revised the target price to 1,400 per share, down from the previous target of 1,500.

Continuing their downward trajectory, shares of Gland Pharma fell nearly 2% during intraday trading on Monday. The stock has been on a downward spiral since reaching its all-time high of 4,350 apiece in August 2021, and it has lost nearly 79% of its value to date by dropping to the current level of 911.60.

In the last one year alone, the stock has plummeted 68.5%, notably registering 9 out of the last 12 months with negative returns, with the current month being so far at the top with a fall of 33%.

On May 19, the stock experienced a sharp decline, hitting the lower circuit limit of 20%. The downward trend continued on the next trading day, with the stock losing an additional 16% of its value and also marking a new all-time low of 861.

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Stock Price Chart of Gland Pharma.

This came after investors disappointment with the company's Q4 earnings, which were released on May 18.

The company experienced a significant decline in its consolidated net profit, with a year-on-year drop of 72% to 79 crore. In comparison, during the same quarter of the previous year, it had reported a net profit of 286 crore.

Additionally, the company's revenue from operations also witnessed a significant decline, falling by 29% to 785 crore compared to 1,103 crore in the corresponding quarter of the previous year.

According to brokerage firm, Axis Securities, the decline in the company's revenues can be attributed to multiple factors, including the impact of a partner filing for bankruptcy, increased competition in molecules Enoxaprin and Heparin Sodium due to the entry of more Chinese players, and the production line shutdown at the Dundagal facility for insulin.

The company's top 5 molecules contributed to the revenue decline in the US market due to inventory rationalization across customers in the US market, high price pressure with increased competition impacting revenue and margins, and a higher base of the last year due to COVID-19-related products sale, it added.

Further, the Indian business was also affected due to the production line shut down in Q4FY23 in the Pashamylaram Penems facility due to line upgradation, which reduced business from the domestic B2C division during the year as compared to the previous year, said the brokerage firm.

Looking ahead, the brokerage maintains an optimistic outlook on the company, highlighting the growth of injectable companies like HIKMA, HOSIPORA, and Aurobindo in the US market, which experienced a year-on-year sales increase of approximately 4%.

A similar growth trajectory is expected for GLAND in its core markets over a longer period, with high single-digit growth projected for India and the rest of the world in the long term, it stated.

While maintaining a 'hold' rating on the stock, the brokerage has revised the target price to 1,400 per share, down from the previous target of 1,500. This new target also reflects an upside potential of 54% from the stock's previous closing price.

However, the brokerage has outlined certain risks that could impact its estimates, including potential USFDA inspections leading to observations or warnings, which may affect revenue growth. Additionally, the entry of new players in the injectable portfolio could increase pricing pressure, and any delays in launching biosimilars in the market pose further challenges.

18 analysts polled by MintGenie on average have a 'hold' call on the stock.

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

 

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First Published: 30 May 2023, 10:06 AM IST