Hold Glenmark Pharma, advises Sumit Bilgaiyan

Sumit Bilgaiyan Founder of Equity99

Glenmark Pharma is one of the few companies in India which has its own R&D and is getting licensing income from its own R&D. Also, it is the only player in India with NCE & Generic blend (only after Sun Pharma).

However, Glenmark witnessed sequentially flattish revenue in last quarter due to sluggish growth in major markets. India formulations and Latam declined by 19 percent and 14 percent QoQ respectively, while US and API revenues were flat.

Sales in ROW markets were the only strong points which grew by 28 percent QoQ. There were cost items, which grew without much explanation from management. While management guided concerns over US sales growth, Glenmark, as on date, has only two profitable SBUs, US generics and India (formulations and API) which contributes 37 percent and 28 percent in consolidated revenues.

With guidance of strong pricing pressure in US generics and 15 percent YoY growth in loss making SBUs (except India), we believe that management alluded to lower EBITDA margin of 12-15 percent without out-license and one-off revenues.