Target: ₹1,970
CMP: ₹1,832.45
Gland Pharma delivered better-than-expected operational performance for the quarter. Despite increased EBITDA loss at Cenexi y-o-y/q-o-q and a lower share of the milestone income, the overall EBITDA margin was better-than-expected at 21.1 per cent, led by better segmental mix and controlled operational cost for the quarter.
We cut our earnings estimate by 8/10/7 per cent for FY25/FY26/FY27 to factor in: the slowdown in US sales on account of a delay in potential approval and subsequent launches, gradual up-tick in the biologics business and lower business due to a temporary setback at the Belgium site of Cenexi.
With two years of earnings decline in FY23/FY24, we believe the earnings are largely at trough and expected to experience revival over FY25-27. We expect 20 per cent earnings CAGR over FY25-27, led by increased volume offtake of base products such as enoxaparin, EBITDA break-even of Cenexi and subsequent better operating leverage, additional business in the biologics segment and commercialisation of new products in the core market segment.
Considering this outlook and stock trading at 16x/14x FY26/FY27 EV/EBITDA and 27x/22.5x FY26/FY27 PE, we reiterate Buy.