Edelweiss recommended hold rating on Glenmark Pharmaceuticals with a target price of Rs 670 in its research report dated November 03, 2017.
Edelweiss' research report on Glenmark Pharmaceuticals
Weak all round performance as: 1) US sales (32% share) declined 2% YoY and 30% QoQ in CC to USD113mn; 2) India (31% share) grew 5% YoY; 3) API (10%) grew 7% YoY. EBITDA margin declined 300bps to 17% despite other expenses falling 34%, which will rebound going forward as business picks up. Higher cash tax rate (INR 1.8bn vs reported tax of INR589mn) and capex (INR 2.6bn) led to negative cash flows and INR 1.35bn increase in debt.
Niche launches like Welchol, Renvela/ Renagel and Finacea have been pushed to FY19 and are built into estimates. Current cash flows are insufficient to take care of current cost structure. Out-licensing deals over the next 12 months could lend some upside. Current valuation stands at 14.8x FY19E EPS. We maintain ‘HOLD/SP’ with target price of INR 670 (16x FY19E EPS).
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