Glenmark Pharmaceuticals Ltd. share price target

Glenmark Pharma Ltd (GNP) is an India-based pharmaceutical company with commercial presence in more than 80 countries across the globe. GNP is primarily focused on generics, specialty and OTC businesses. The company has strong regional/country-specific presence in diabetes,...

GNP sales grew 21% QoQ while it grew 10% YoY, implying seasonality benefits in key markets including India and US. Overall, its key growth came in India (15% YoY), US (15% QoQ), ROW (14% YoY) and Brazil (23%YoY). Adj. EBITDA grew 22% QoQ while on YoY basis it was flat, again it showed traditionally Q2 was strong quarter for GNP due to seasonality. While sales...

Glenmark Pharma Ltd (GNP) is an India-based pharmaceutical company with commercial presence in more than 80 countries across the globe. GNP is primarily focused on generics, specialty and OTC businesses. The company has strong regional/country-specific presence in diabetes,...

With a further 8% fall in the stock price, our conviction on our BUY rating has grown multifold as we realize that the trailing valuation is now 14x FY19 EPS for a business that holds one of the top 5 pharmaceutical franchises in India, which is also the fastest-growing among large peers. Moreover, there is value unlocking at play, with the potential listing of the novel subsidiary and debt reduction on account of divestment of non-core assets. We believe the de-merger will lead to sharp improvement in profitability for the ex-novel business and a healthier balance sheet. We value the novel and specialty businesses at Rs 135/sh. As we understand this listing could take between 12-15 months and is contingent upon several approvals, we have not included it in the TP. Glenmark delivered sub-par numbers in 1QFY20 and only the India segment was able to impress with the highest growth among listed-peers. Valuations are as low as 15/12x FY20/21E P/E, while the India business alone is valued at Rs 450/sh. We believe the post-result fall was an overreaction. Re-iterate BUY with a revised TP of Rs 500 (16x FY21E EPS).

India/Europe/API drive revenue growth: 1QFY20 revenues grew 7.3% YoY to INR22.8b (v/s est. INR25.9b), led by healthy growth in (a) Domestic Formulation (33% of sales), up 13.4% YoY to INR7.5b, (b) Europe business (11% of sales), up 10.5% YoY to INR2.4b, and (3) the API business (10% of sales), up ~10% YoY to INR2.3b. US business (32% of sales) grew at a subdued rate of 4% YoY to INR7.3b, (USD105m, flat on constant currency basis). RoW also grew moderately at 5.4% YoY to INR2.6b. Overall, revenue...

No Meaningful Upside in Sight; Maintain HOLD Glenmark Pharmaceuticals (GNP) has delivered disappointing performance on all metrics in 1QFY20 due to weak growth across all geographies barring India. Its revenue/EBITDA missed our estimate by 6%/10%, respectively while EBITDA margin came in line with our estimate. Revenue declined by 9% QoQ to Rs23.2bn. US business fell by 4% QoQ to US$105mn, while India Business grew by 13% (both on YoY and QoQ basis) to Rs7.5bn. It recorded 12% growth vs. IPM growth of ~10% (IQVIA MAT Jun'19), while consumer business grew by 27% YoY to Rs556mn. GNP's Baddi formulation facility classified as (inspection 15-20th Apr'19) Official Action Indicated...

for better US prospects as it expects two key approvals of limited competition drugs (one injectable and one CGT drug) as well as turnaround of gMupirocin in the next three quarters of FY20E. With launch of in-licensed SGLT2...

Despite weaker US performance and lower profitability, we remain positive on the stock due to expected value unlocking from the listing of the novel subsidiary and potential debt reduction on account of divestment of non-core assets. We believe the de-merger will lead to better profitability for the ex-novel business and an improved balance sheet (debt reduction and lower intangibles). We value the novel and specialty businesses at Rs 135/sh (value of the base business stands at Rs 595/sh, 16x FY21E EPS). However, we believe this listing could take anywhere between 12-15 months. We maintain BUY on GNP despite reporting marginal miss in profitability. Lower US sales due to the gMupirocin stock-out situation was the key reason. TP has been reduced to Rs 730/sh on account of weaker guidance for the US generics business.

Heavy promo spend cause sprain in earnings; Restructuring in progress Sales largely in-line led by ROW/API: Sales increased 12% YoY to INR25b (our estimate: INR25.5b), led by growth of 29% YoY (to INR4b) in ROW sales and 21% YoY (to INR2.5b) in API sales. India sales grew at a moderate rate of 9.7% YoY to INR7b, while US sales were up 10% YoY at INR7.7b, largely supported by FX tailwinds. Gross margin (GM) improved 80bp YoY to 65.9% due to a superior product mix. EBITDA margin expanded 80bp YoY to 13.9% (our estimate: 15.9%), led by higher GM and lower opex (adjusting for one-time expense of INR250m...

US generics comprise 32% of total revenues. So far, the company has received approval for 152 ANDAs while another 53 are pending approval, of which 28 are Para IV applications. Key therapies in the US, going forward, will be oncology dermatology and respiratory. The company expects to launch 12-15 products. We expect the US to grow at 4.5% CAGR in FY1921E to | 3427 crore mainly due high base and lack of meaningful launches. Targeting specific therapies in IPM Glenmark is ranked fourteenth in domestic formulations with a market share of 2.2%. It is a market leader in dermatology and improving its presence in...