Experts have a positive long-term view on the stock, given the company's strong financials and hold in the injectable business.
Injectable focused B2B company Gland Pharma made a strong debut on November 20, rising 23.3 percent despite volatile market conditions.
The stock opened 14 percent higher at Rs 1,710 on the National Stock Exchange and touched an intraday high of Rs 1,850, 23.3 percent higher than the issue price of Rs 1,500.
At the time of publishing this copy, it was trading at Rs 1,782.85, up 4.26 percent over the opening price and up 18.9 percent from the issue price, with volumes of 94.11 lakh equity shares.
Experts have a positive long-term view on the stock, given the company's strong financials and hold in the injectable business. They advise holding the stock for the long term, anticipating strong returns in the coming years.
They, however, advised short-term investors and those who had subscribed the issue for listing gains to book profits.
"We suggest traders and short-term investors can look to book profit at 10-15 percent of listing gains. From a long-term perspective, injectable business is one of the growing businesses and investors can hold it for long term," Yash Gupta-Equity Research Associate at Angel Broking told Moneycontrol.
Astha Jain, a Senior Research Analyst at Hem Securities, also said investors with long-term perspective should hold the stock on the listing day.
Jain expects the stock to post more than 30 percent returns in one year as the company has extensive and vertically integrated injectables manufacturing capabilities, with a consistent regulatory compliance track record.
"Also the company has a track record of growth and profitability from a diversified revenue base with healthy cash flows. Hence fundamentals of the company look strong," she said.
Established in Hyderabad in 1978, Gland Pharma has grown over the years from a contract manufacturer of small-volume liquid parenteral products to emerge as one of the largest and fastest-growing injectable focused companies, with a footprint across 60 countries, including the United States, Canada, Australia, India and in Europe, say experts.
The company operates primarily under a business to business (B2B) model and has an impressive record in the development, manufacturing and marketing of complex injectables. This presence across the value chain has helped the company witness an exponential growth.
The company doesn't have a direct listed peer in the domestic market and is promoted by Shanghai Fosun Pharma, a global pharmaceutical major. Promoters' stake in the company has been reduced to 58 percent from 74 percent after the issue.
"We believe that the company has a unique business model of B2B nature, aided by vertical integration & R&D expertise. Moreover, the company has expansion plans in terms of geographical & capacity expansion & is open to inorganic opportunities as well. It also has a strong balance sheet with negligible debt & strong cashflows," KR Choksey said.
The company has seven manufacturing facilities, four of which are for formulations and three are for APIs. The entire API production is consumed internally.
It had had a CAGR growth of 27.5 percent, 33.6 percent and 55.2 percent in revenue, EBITDA and PAT, respectively, over FY18-20. The company also had an impressive return profile with ROE, ROCE, ROA of 21.2 percent, 23.6 percent and 18.9 percent, respectively, in FY20.
Return on equity improved from 13.3 percent in FY18 to 21.2 percent in FY20, primarily because of teh improvement in net profit margin from 19.8 percent in FY18 to 29.3 percent in FY20.
"Only high-risk long-term investors may hold Gland Pharma post-listing, if one is a retail investor looking for decent 6-10 percent return on investment as listing gain, better to book profits," Prashanth Tapse, AVP Research at Mehta Equities said.
Want to buy?
"If investors want to buy the stock for the long term, they can buy stock in the range of Rs 1,450-1,550," Yash Gupta said
Gland Pharma is one of the fastest-growing generic injectable companies in the US, which accounted for 67 percent of the company's revenues in FY20. Its exports account for 82 percent of its revenue.
"If a high-risk investor wishes to buy post listing, we believe one has to wait for the short term and we could see the stock around Rs 1,200-1,300 levels which can be considered as right levels to accumulate for the long term," Tapse said.
Except the Chinese parental concern, Gland Pharma has a strong fundamental potential B2B business model with focussed business into complex injectable, which is a high entry barrier and acts as an opportunity for the company on the long-term basis, he said.
According to Astha Jain, those looking to buy the stock can do if it is available at around Rs 1,570-1,580 level.Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.