Analyst Corner: ‘Neutral on Glenmark Pharma; PT at Rs 330

By: |
Updated: Feb 19, 2020 7:31 AM

GNP expects 10-15 ANDA approvals annually. Gross debt stands at Rs46.8b and net debt at Rs36.5b as of Dec’19.

Analyst Corner, Glenmark Pharma, ANDA pipeline, LATAM, Europe, CAGR, capexCapex is estimated at Rs7-8b for FY21.

Healthy traction in existing products and addition of in-licensed products facilitated robust growth in India/LATAM. However, the benefit was more than offset by intensified competition in key products in US generics. We maintain our EPS estimate for FY20/21/22.

While the US generics business has a strong ANDA pipeline and the DF/Europe/API outlook remains promising, the return ratios are yet to improve meaningfully. Maintain ‘Neutral’.  Sales were up 5.1% y-o-y at Rs26.4b (in-line), led by India (+18.2% y-o-y to Rs7.9b; 30% of sales) and LATAM (+54.1% y-o-y to Rs1.6b; 6% of sales) as well as API segment (+9.6% y-o-y to Rs2.6b; 10% of sales). RoW (12% of sales) was muted with 0.4% y-o-y growth to Rs3.4b. Europe sales declined 4% y-o-y to Rs3.1b (12% of sales) and US sales were down 6.5% y-o-y at Rs8b ($112.7m; 30% of sales). Gross margin shrank 80bp y-o-y to 64.9%. Ebitda margin contracted at a higher rate of 250bp y-o-y to 13% (our estimate: 14.7%), led by lower gross margin and higher staff cost/other expenses (+110bp/+70bp y-o-y). Ebitda declined ~12% y-o-y to Rs3.4b (our estimate: Rs3.9b). Adj. PAT came in line at Rs1.8b (-17% y-o-y).

GNP expects 10-15 ANDA approvals annually. Gross debt stands at Rs46.8b and net debt at Rs36.5b as of Dec’19. MR strength is at 3,800 and will remain in this range over 12-15 months. Capex is estimated at Rs7-8b for FY21. API has potential to deliver 13-15% CAGR over the next 3-5 years. India biz growth is expected to be 10-15% over the next 12-15 months. We expect 8% earnings CAGR over FY19-22, led by sales CAGR of 13.5% in India and 10% in API/LATAM/Europe.

We continue valuing GNP at 12x 12M forward earnings to arrive at a price target of Rs330 (prior: Rs341). Maintain ‘Neutral’ on limited upside from current levels.

Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.

Next Stories
1Cotton prices may remain under pressure on huge carryover stocks
2Deregulation? Govt imposes stock limits on onion
3Britannia Industries Rating: Buy- Performance was in line with estimates