Buy Glenmark; target of Rs 710: HDFC Securities

HDFC Securities is bullish on Glenmark has recommended buy rating on the stock with a target price of Rs 710 in its research report dated May 31, 2018.

Broker Research

September 18, 2018 / 15:55 IST

HDFC Securities's research report on Glenmark

Affected by lack of lucrative product approvals for the US market and higher R&D spend, Glenmark pharma’s (GNP) reported second consecutive quarter with sub-par profitability. EBITDA declined 41% YoY to Rs 2.9bn and EBITDA margin at 13.5% was down 735bps YoY. Top line decreased 7.2%YoY due to loss exclusivity in gZetia. The US business declined 30%YoY/5%QoQ to Rs 7bn. Reported PAT at ~Rs 1.5bn was up ~600%YoY/60%QoQ supported by forex gains of Rs 640mn (vs loss in 3QFY18).

Outlook

In the absence of lucrative product launches for the US market, the base margins have fallen from 18-19% in FY17 to 13-14% over last two quarters. However, with the recent gWelchol and gProtopic approvals, margins are likely to normalise in 1HFY19. The management has also guided for additional 10+ launches in FY19 for the US market, which will help GNP to maintain 16-17% margins in FY19E. Foresee 6%/10% revenue/earnings CAGR over FY17-20E. Maintain BUY with a revised TP of Rs 710 (16x FY20E and Rs 135/sh for pipeline).

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