Buy Glenmark Pharmaceuticals: target of Rs 635: ICICI Direct

ICICI Direct's research report on Glenmark Pharmaceuticals

Q2 revenues grew 4.9% YoY to Rs 2953 crore with 17.2% YoY growth in domestic sales to Rs 1051 crore due to additional contribution from Fabiflu (favipiravir) being partly offset by 11.3% decline in US to Rs 752 crore. Europe business grew 11.6% YoY to Rs 318 crore. RoW markets grew 9.1% YoY to 381 crore while the API segment grew 19.1% YoY to Rs 321 crore. EBITDA margins improved 272 bps YoY to 18.7% mainly due to lower other expenditure. EBITDA grew 22.7% YoY to Rs 553 crore. Adjusted PAT de-grew 9.7% YoY to Rs 231 crore. Delta vis-à-vis EBITDA was due to lower other income and higher tax rate. Exceptional items in Q2FY21 were Rs 3.14 crore on gain arising from sale of Vwash brand to HUL.

Outlook

We believe reduction of debt, improvement in free cash flow and margins are key events to watch. We arrive at our target price of Rs 635 based on 14x FY23E EPS of Rs 45.2.

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