Buy Glenmark Pharmaceuticals; target of Rs 1040: Axis Direct

Our meeting with Mr. Glenn Saldanha (CMD, Glenmark Pharma) reaffirms our view that US, India and Russia (key businesses comprising 70% of H1FY17 sales) have strong growth visibility which would help achieve FY19 EBITDA guidance of 23% (vs.20% in H1FY17). This along with gZetia upside would also help in reducing net debt by Rs 6-8 bn by Q1FY18. GNP expects strong US growth led by ramp-up in recent launches, gZetia in Dec’16, derma launches in FY18 &complex generics from FY19. GNP plans R&D day in Dec’16 to update on its complex generics, 505b (2) initiatives and innovative pipeline.

ValuationWe maintain BUY with TP to Rs 1,040 (19x Sep’18E EPS + Rs 6 for novel R&D project). PE could rerate with execution of guidance (reduction in debt from improving base business and gZetia upside).