Motilal Oswal's research report on Gland Pharma
Gland Pharma’s (GLAND) 3QFY23 performance was below our expectation, affected by lower sales across key markets due to inventory rationalization by customers and prolonged supply chain issues. GLAND has signed a share purchase agreement with Cenexi in Jan’23 and is on track for necessary regulatory approvals for the acquisition. We cut our EPS estimates by 10%/12%/11% for FY23/FY24/FY25 and lower the PE multiple to 22x from 24x to factor in 1) lower off-take of Enoxaparin, 2) the gestation period on account of getting approval for an alternate supplier of stopper for Heparin, 3) production delays, 4) a reduction in business of low-margin products, and 5) lower pricing of Heparin in India. We arrive at TP of INR1,700, based on 22x 12M forward earnings. Considering near-term business headwinds, we expect a 22% earnings decline YoY in FY23. However, with the resolution of issues, a better business outlook for biologics/China and the addition of Cenexi’s business, we expect a 17% earnings CAGR over FY23-25. The 58% fall in the stock price in the past one year already factors in the deterioration in the business outlook. Maintain Buy.
Accordingly, we arrive at a TP of INR1,700, based on 22x 12M forward earnings. The 58% fall in stock price in the past one year already factors in the deterioration in the business outlook. Maintain Buy.