Accumulate Glenmark Pharmaceuticals; target of Rs 984: KR Choksey

KR Choksey's research report on Glenmark Pharmaceuticals

For Q3FY24, Glenmark Pharma’s revenue declined by 19.1% YoY(-21.8% QoQ) to INR 25,067 Mn. The revenue missed our estimate by 29.0% due to decline in India revenue as there were changes in the distribution model which was partially offset by growth in Europe and Rest of the world market. For 9MFY24, revenue increased 2.0% YoY to INR 87,501 Mn. EBITDA for the quarter was negative at INR 2,086 Mn as against positive EBITDA of INR 4,740 Mn in Q3FY23 and INR 4,623 Mn in Q2FY24. We expected EBITDA at INR 6,480 Mn but it missed our estimate. This was due to a sharp decline in the revenue, and higher other expenses. For 9MFY24, EBITDA declined 44.1% YoY to INR 6,910 Mn and EBITDA margins contracted 652 bps YoY. The reported loss for the quarter was INR 4,701 Mn as against a net profit of INR 1,675 Mn in Q3FY23 and net loss of INR 2,007 Mn in Q2FY24. We expected a net profit of INR 2,971 Mn but it missed our estimate. This was due to weak operating performance and higher finance costs. We believe the injectable portfolio in the US, the launch of Ryaltris in various markets, and momentum with key brands in existing geographies will drive growth going forward.

Outlook

Currently, the stock is trading at 22.3x and 18.3x based on FY25E/FY26E EPS, respectively. We introduce FY26E estimates; expect FY23-FY26E revenue CAGR of 9.2% and corresponding Adj PAT CAGR of 32.5%. We apply a PE multiple of 20.0x to our FY26E EPS of INR 49.2 and arrive at a target price of INR 984 (INR 816 previously). Accordingly, we maintain our ACCUMULATE rating on the stock, with a potential upside of 9.2%.

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Glenmark - 22022024 - kr