Shares of Gland Pharma dropped over 3% to an intra-day low of Rs 1,791 on the NSE after brokerage firm Goldman Sachs downgraded the stock from a “buy” to a “sell” rating.
The brokerage also significantly cut its price target by 27%, lowering it to Rs 1,500 from the previous target of Rs 2,075. Notably, this revised target matches the IPO price of Gland Pharma when it debuted on the stock market in 2020.
Key Concerns for Gland Pharma’s Profitability Spotted by Goldman Sachs
Goldman Sachs has identified five key concerns contributing to its bearish outlook on Gland Pharma. First, the company’s increasing dependence on lower-margin legacy products is expected to hinder growth. Second, there is pricing pressure and rising competition in its key products within the US market, posing significant challenges.
Additionally, Goldman Sachs notes potential delays in the launch of higher-margin new products, which could negatively impact revenue. The brokerage also highlights the slower-than-expected turnaround at Cenexi, the contract manufacturing business acquired by Gland Pharma, raising further concerns about the company’s performance.
Finally, Gland Pharma faces higher investments required for its newer ventures, which may strain its financial resources and limit its ability to respond to market demands effectively.
Expensive Valuation and Historical Downgrades
At a 28 times 12-month forward price-to-earnings (P/E) multiple, Goldman Sachs considers Gland Pharma’s current valuation expensive, particularly in comparison to its key injectable peers, which trade at a P/E multiple of around 20 times.
Goldman Sachs initially began coverage on Gland Pharma with a “buy” rating and a price target of Rs 2,830 in 2022. However, the brokerage has consistently downgraded its price target over time due to evolving concerns about the company’s performance and market outlook.
Stock Performance in Last One Year
The shares of Gland Pharma have demonstrated mixed returns across various time intervals. In the last month, the stock delivered a negative return of 4.17%. Over the past six months, it exhibited a significant decline, with negative returns of 2%, indicating a strong downtrend.
Year-to-date figures further emphasize the stock’s bearish trend, recording negative returns of 6.72%. However, over the last twelve months, the stock managed to maintain positive returns of 8.35%, highlighting its resilience in the longer term.
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