Glenmark Pharma: Nomura retains 'Neutral' stance, sets targets at Rs 1,500

Nomura India has released a report maintaining a 'Neutral' rating on Glenmark Pharmaceuticals Ltd, setting a target price of Rs 1,500 by September 2025. The valuation is grounded on a sum-of-the-parts analysis, with the base business excluding innovation spend valued at 17.5 times the estimated EPS for September 2026 of Rs 93.7.

The brokerage expressed concerns over Glenmark's financial performance in FY25, noting that the company's net debt increased by Rs 1,160 crore, reaching Rs 490 crore by March 2025. This surge occurred despite a Rs 800 crore inflow from the sale of a stake in the API business. Nomura attributed the rise in debt to a significant increase in working capital from the previous year's low base.

Glenmark's US revenue saw a decline of $10 million quarter-on-quarter, down to $82.4 million, marking a 41-quarter low. The company attributed this drop to competitive pressures and a lack of significant new product launches. Nomura highlighted that the overall revenue for FY25 at Rs 13,300 crore fell short of the guided range of Rs 13,500-14,000 crore.

The EBITDA margin for FY25 also missed expectations, standing at 17.8% against the guidance of 19%. Nomura noted that the company's performance was below its estimates, with sales and EBITDA missing targets by 2% and 7%, respectively. An exceptional loss of Rs 370 crore further impacted net earnings during the quarter.

Despite a flat performance in the India formulation business, the consumer care segment within it showed robust growth, recording a 23.5% increase year-on-year and contributing to 9% of the 4QFY25 India revenue. This contrasted with a 1.5% decline in the prescription segment, impacted by low seasonal demand for respiratory products and competitive pressures in the diabetes portfolio.

Glenmark launched 13 new products in FY25, including seven in the fourth quarter, along with receiving five ANDA approvals. The company anticipates growth revival in FY26 with new launches, particularly in the respiratory segment, and plans to introduce in-licensed oncology products.

Looking forward, Glenmark aims to expand its product offerings, having filed for one strength of gFlovent MDI, which constitutes approximately 30% of the Flovent market. However, filings for the remaining strengths have been delayed. The company currently has 51 ANDAs pending approval, including 23 Paragraph IV ANDAs.

Nomura's report underscores the challenges Glenmark faces in maintaining competitive market positions due to increased debt and missed financial targets. However, the brokerage remains cautiously optimistic about potential growth through strategic product launches and market expansion in the coming year.