Target: ₹420

CMP: ₹410

We attended Glenmark Pharma’s investor day to understand the management’s strategies across major business segments over the next four-to-five years.

GNP aims to boost RoCE (EBIT/capital employed) to 22 per cent by FY27 (from 17 per cent in FY22), with an increased share of the branded generics business, controlled R&D spends towards the NCE portfolio, and sustained improvement in operating leverage.

It also aims to have zero net debt by FY26.

We value GNP at 10x 12M forward earnings to arrive at our TP of ₹420. We remain Neutral on the stock, given its 5 per cent earnings CAGR over FY18-22.

We expect a 9 per cent earnings CAGR over FY22-24, led by: a) superior execution in the Branded Generics market of India, Europe, and RoW; and controlled R&D spends. The increased price erosion in the US and higher OPEX, related to marketing and logistics, is expected to keep EBITDA margin under check.

The benefit from complex product filings is expected from FY25, subject to timely approval. Asset utilization at Monroe for the US market is also subject to successful resolution of regulatory issues.