Comments
Prabhudas Lilladher
Glenmark Pharma (Sell)
Target: ₹446
CMP: ₹492
We reduce our earnings estimate by one per cent for FY22/23 as we lower our growth projections for semi-regulated market. Q3 FY21 earnings were in line with our estimates led by growth in India formulations and cost rationalisation.
India formulations grew 12 per cent y-o-y while adjusted growth (ex-Favipiravir) in lower single digit. ICHNOS Sciences’ fund-raising is to get further delayed.
Glenmark Pharmaceuticals is our top sell idea given: 1) US derma portfolio (35 per cent of US revenue) would lag growth due to competition; 2) Has thin US product pipeline with only 47 pending (Abbreviated New Drug Application) ANDAs plus guidance of 8-10 new launches in FY21; 3) 60-65 per cent of R&D spends towards hardly visible specialty products; 4) Insignificant EBITDA contribution from new Monroe facility even with qualitative approvals (due to higher operating cost); 5) Appreciating USD (against rupee) may increase debt (current net debt ₹3,640 crore) and 6) Muted growth in core domestic formulations.
We maintain ‘Sell’ and reduce our TP to ₹446 (earlier ₹449) based on 12x PE (Unchanged) on FY23E EPS of ₹37.
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