Gland Pharma tanks 7% as analysts cut earnings estimates post poor Q1

Shares of Gland Pharma tanked about 7 percent after the company reported disappointing quarterly numbers for the quarter-ended June.

The company said its profits slumped 35 percent year-on-year (YoY) to Rs 229.2 crore. Its revenue declined 26 percent to Rs 856.9 crore. Ebitda margins also came down by 400 basis points. 

The company said continued supply disruption, cost escalation and the Company’s decision to shut down two of its manufacturing lines for productivity improvement have affected the business for the quarter.

The company has generated Rs 332.8 crore of cash flow from operations during Q1FY23. As of June 2022, the company had a total Rs 3785.3 crore of cash.

Core markets of US, Europe, Canada, and Australia accounted for 82 percent of revenue during Q1FY23 as compared to 65 percent in Q1FY22. Sale to the US market is comprising of products sold to both US customers and Indian customers for US markets. For Q1FY23 sale to US customers was Rs 551.3 crore and to Indian customers for US markets was Rs 87.2 crore, totalling to Rs 638.5 crore. 

Rest of the World markets accounted for 12 percent of Q1FY23 revenue for the quarter as against 19 percent in Q1FY22. The delay in input material supplies has significantly impacted the ability to take up orders. The Company’s key markets continue to remain MENA, LATAM and APAC, and it has registered additional products during the quarter in new geographies.

India market accounts for 6 percent of Q1FY23 revenue as compared to 16 percent in Q1FY22, the company said. India B2B sales were impacted due to planned shutdown of Insulin line during the quarter and higher sales of COVID drugs like Remdesivir and Enoxaparin Injection during the same quarter of last year.

Axis Securities said core markets FY23 for Gland Pharma seems to be flat revenue growth due to increased competition and moderation demand, therefore we recommend “Hold” with target price of Rs 2,700.

Elara Securities said Q1 revenue was lower as Gland is maintaining adequate inventory for the US. “Expect gross margin to remain at elevated levels of 55-56 percent due to higher contribution from the US. We cut FY23E/24 earnings 11 percent/13 percent respectively due to weak results,” it said, adding that it maintains ‘Buy’ rating with target at Rs 3,100 (down from Rs 3,780 earlier).

The stock traded down nearly 7 percent to Rs 2308 on BSE.