Buy Gland Pharma; target of Rs 2240: Motilal Oswal

Motilal Oswal's research report on Gland Pharma

Gland Pharma (GLAND) delivered operationally better-than-expected performance in 3QYF24. GLAND had robust traction in its core markets. This was, however, offset to some extent by its inferior performance in ROW markets. Higher depreciation and tax rates led to lower-than-expected earnings for 3QFY24. We cut our FY24 earnings estimates by 5% to factor in: a) a gradual improvement in the profitability of Cenexi, and b) a subdued sales outlook for the India business over the near term. We value GLAND at 27x 12M forward earnings to arrive at our TP of INR2,240.  GLAND is implementing efforts to strengthen its base business in the core markets through product launches as well as improving off-take of its existing products. Further, it is also in process to enhance its sales prospects and the profitability of its acquired business (Cenexi). Accordingly, we expect a 20% earnings CAGR over FY24-26. Reiterate BUY.

Outlook

We cut our FY24 earnings estimates by 5% to factor in: a) a gradual improvement in the profitability of Cenexi, and b) a subdued sales outlook for the India business over the near term. We value GLAND at 27x 12M forward earnings to arrive at our TP of INR2,240.

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