Target: ₹820
CMP: ₹900.30
Glenmark Pharma (GNP) delivered a miss on its Q3-FY24 earnings, largely due to the inventory reset in the domestic formulation (DF) business and an inferior show in the US generics segment. GNP has completed its remediation measures at Monroe and would be requesting the USFDA for a re-inspection.
We cut our FY24/FY25/FY26 estimates by 94/4/4 per cent to factor in: the significant reduction in the domestic formulation business due to stock consolidation and inventory rationalisation, and a prolonged delay in ANDA approvals due to regulatory issues. This is partly offset by: a) robust traction in the EU business. We value GNP at 17x 12M forward earnings to arrive at our TP of ₹820.
The transaction with respect to the sale of API business (Glenmark Life Sciences) is subject to customary closing conditions precedent, including receipt of regulatory and shareholder approvals.
GNP is implementing efforts to improve outlook in its core markets through: the new launches/operational efficiency in the DF segment, filing complex respiratory products in the US segment, and resolving regulatory issues at its manufacturing site. However, we reiterate our Neutral rating as the current valuation factors in the upside in the earnings.