HDFC Securities is bullish on Glenmark has recommended buy rating on the stock with a target price of Rs 500 in its research report dated August 16, 2019.
HDFC Securities' research report on Glenmark
performance was driven by weak traction reflected in all international markets. In-line with expectations, the US business performed poorly with US$ 105mn revenues, flat YoY. gMupirocin sales continued to decline on increased competition. Still, the mgmt is confident of achieving single-digit growth in FY20E. With 3 limited competition launches in 2HFY20, we model a 6% CAGR over FY19-21E. The domestic sales registered a 13% YoY growth during the quarter. In India, Glenmark continues to deliver strong performance supported by healthy growth in Anti-diabetes, Respiratory and Derma therapies. Expect the co to keep out-performing the IPM with a chronic-heavy portfolio and achieve a 13% CAGR (FY19-21E). In other segments, EU, RoW, LATAM and API grew at 10.5/5.4/-16.9/9.8% YoY respectively. The growth in LATAM and RoW markets is likely to recover in the subsequent quarters on the back of new launches. EBITDA declined 1/6% YoY/QoQ to Rs 3.4bn on lower US sales. Margin was 14.7% (-130/+51bps YoY/QoQ). Due to higher interest cost, lower other income and higher tax, PAT declined 53/32% YoY/QoQ to Rs 1.0bn.
Glenmark delivered sub-par numbers in 1QFY20 and only the India segment was able to impress with the highest growth among listed-peers. Valuations are as low as 15/12x FY20/21E P/E, while the India business alone is valued at Rs 450/sh. We believe the post-result fall was an overreaction. Re-iterate BUY with a revised TP of Rs 500 (16x FY21E EPS).
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