Gland Pharma shares: Up to 28% downside ahead for stock, suggests Nomura, two others

Shares of Gland Pharma might have rallied 20 per cent in a single day, a few analyst targets on the stock suggest up to 28 per cent downside ahead. Nomura India has a share price target of Rs 1,157 while InCred Equities finds the stock worth Rs 1,431. Even as Motilal Oswal Securities has upped the target price for Gland Pharma to Rs 1,560, that also fell short of Rs 1,612.60, the level drug maker settled at on Tuesday.

Gland Pharma's revenue and margins recovered in the June quarter after a weak March quarter. Nomura India said June quarter sales, Ebitda and profit beat its estimates by 3.9 per cent, 16.1 per cent and 11.3 per cent, respectively.

Gland Pharma completed the Cenexi acquisition in April and consolidated two months of Cenexi financials in the June quarter. Ex-Cenexi, overall revenue grew 3.5 per cent YoY while Ebitda in fact declined 4 per cent YoY, it noted.

The foreign brokerage said it continues to value the stock at 16 times FY25 earnings while the stock currently trades at 22.8 times FY24 EPS of Rs 59.

During the June quarter, Gland Pharma filed five ANDAs, and received approval for nine ANDAs. So far the company has filed seven complex products while there are 12 are under development. The 19 complex filings are four peptides, four suspension products, seven hormonal suspension products, two microspheres, one emulsion and one nano suspension product.

The company believes one of the complex products may be approved and launched in 4QFY24 or 1QFY25.

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"Gland Pharma’s business has high operating leverage, and margins usually follow revenue recovery. FY24F-25F margins will also be influenced by whether Gland Pharma decides to aggressively bid for Heparin tenders or not as well as on when its Enoxaparin channel inventory depletes. We bake in a recovery in 2HFY24F and retain HOLD rating on the stock with a higher target price of Rs 1,431 (Rs 1,056 earlier). Faster-than-expected recovery is a key upside risk while a delayed recovery is a key downside risk," said InCred Equities.

Motilal Oswal said Gland Pharma remains on track to not only revive the base business but also to:  increase its offerings in newer markets like China, build niche pipeline for regulated markets, and enhance scope of synergy from Cenexi acquisition. It values the stock at Rs at 23 times one-year forward earnings to arrive at a target of Rs 1,560.

 

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