Emkay Global Financial is bullish on Glenmark Pharma has recommended buy rating on the stock with a target price of Rs 526 in its research report dated June 29, 2020.
Emkay Global Financial's report on Glenmark Pharma
Q4 operating performance beat estimates led by tight cost controls, though the sales trend was mixed, with strong growth in India and weak in US. India business posted over 15% growth for the third straight quarter, partly led by pre-buying. US continues to disappoint, owing to price erosion in the derma segment, fall in sales of key products and Ranitidine impurity issue. With a thin pipeline (44 pending approvals) and low filings (8 in FY20), we expect US growth to remain moderate in the next few years. Net debt remains high at Rs37.6bn (vs. Rs36.5bn qoq) and up almost Rs3bn yoy. This is much higher than management guidance of Rs7-8bn reduction in FY20. Debt reduction remains key to the stock’s re-rating, in our view.
We changed FY21/22E EPS marginally by +2%/-1%. We retain Buy with a revised TP of Rs526, valuing the stock at 15xJune’22 EPS (vs 8x Mar’22EPS earlier), given the recent Faripiravir approval. Clarity on debt reduction is the key trigger. GNP is an EW in EAP.
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