Gland Pharma shares crash 33% in two sessions; here's what brokerages say

Shares of Gland Pharma Ltd fell sharply for the second straight session on Monday. The stock slumped by 16.56 per cent to close at Rs 893.50 today. The counter has declined 33.25 per cent in two sessions. The drop in stock value came after Gland Pharma's March quarter profit plunged 72 per cent, year-on-year (YoY), due to a shutdown at one of its facilities in Telangana and soft demand. The drugmaker's net profit slipped to Rs 79 crore in Q4 FY23 against Rs 285 crore in the same period last year.

Brokerages have cut Gland Pharma's earnings estimates, citing stability concerns, increased uncertainty and bankruptcy of an important company customer.

Nomura India said the company has refrained from providing any guidance on revenue growth and EBITDA margin. The brokerage has cut its earnings estimates by 15-17 per cent for FY24 and FY25. That said, Nomura has a target of Rs 1,157 on the stock.

Motilal Oswal Securities has cut its earnings by 22-36 per cent for FY24 and FY25 factoring in reduction in the scope of business from a bankrupt customer, gradual revival in business and reduced share of profit due to higher competition in the existing product portfolio.

The brokerage, however, has a target of Rs 1,460 on the counter but it suggested a slow recovery over the next 12-15 months.

Elara Securities said, "The management alluded to multiple headwinds that hit the business in Q4, including the temporary shutdown in a production line and reduced supplies to a customer that is in financial difficulty and continued price erosion in the US market. But the granular details seem unconvincing. Thus, we are not confident of a bottom emerging regarding the sustainable level of revenue/profitability."

On the technical front, Gland Pharma traded lower than the 5-day, 20-, 50-, 100- and 200-day moving averages. The counter's 14-day relative strength index (RSI) came at 16.61. A level below 30 is defined as oversold while a value above 70 is considered overbought. The company's stock has a price-to-equity (P/E) ratio of 22.73. It has a price-to-book (P/B) value of 2.22.

Yet, the stock has an average target price of Rs 1,700, Trendlyne data showed, suggesting a potential upside of 90.25 per cent. The scrip has a one-year beta of 0.27, indicating low volatility.

Meanwhile, Indian equity benchmarks on Monday extended their climb for the second straight session, led by gains in technology, metals, healthcare, consumer durables and energy stocks. The 30-share BSE Sensex pack 234 points or 0.38 per cent higher at 61,964; while the broader NSE Nifty index moved 111 points or 0.61 per cent up to settle at 18,314.

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