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Gland Pharma shares plunge 12% today: Should you buy, hold or sell?

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Shares of Gland Pharma dropped 12 per cent in Thursday’s trade after brokerages cut their earnings forecasts for the drug maker following its September quarter results, and ‘uninspiring outlook’.

The drug maker reported a 20 per cent drop in September quarter profit, with the management withdrawing its FY23 guidance mainly due to cost inflation.
 
“Gland Pharma’s September quarter results were a mixed bag; while revenue was better than our estimate mainly due to a sharp recovery in RoW revenue, margins were lower than our and consensus estimates,” said Nirmal Bang Institutional Equities.

The scrip fell 11.64 per cent to hit a low of Rs 1,965.10 on BSE. Including Thursday’s losses, the stock is down 48 per cent year-to-date.
 
Gland Pharma clocked a 20.14 per cent decline in consolidated net profit at Rs 241.24 crore for the September quarter on a marginal drop in consolidated revenue from operations at Rs 1,044.4 crore.

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Kotak Institutional Equities said the near-term outlook is sluggish and the product pipeline (63 pending ANDAs) and entry into new markets such as China (first approval expected in Q3FY23) provide medium-term growth visibility.

Kotak said it likes Gland’s entry into the biologics CDMO space but said the market is ignoring the high gestation period. 

“We lower EPS estimates for FY2023-25 by 8-9 per centto account for lower sales across markets and increased investments. Even as we factor in a sizeable recovery going forward, we factor in lower long-term sales and Ebitda margins for Gland. We roll forward from June 2024 to September 2024. We retain ‘reduce’ rating with a revised FV of Rs 1,975  from Rs2,325 earlier,” it said.

Nirmal Bang has cut its cut our revenue estimates by 2-6 per cent for FY23-FY25 and and Ebitda estimates by 4-11 per cent mainly due to near-term slowdown in growth, owing to cost inflation and volume decline in the US.

“Also, margins are likely to remain under pressure in the near term due to cost inflation and negative operational leverage. Although we are not positive about the US generics market, we like Gland Pharma because of its presence in low competition injectable segment, ability to build economies of scale with a partnership model and a strong compliance track record. Also, the stock has corrected by 30% in the last six months, factoring in all near term concerns,” 

For Motilal Oswal, Gland’s September quarter operational performance was in line with expectation. It said that Gland has exhibited business recovery to some extent in September quarter against June quarter. Further, it continues to put effort towards complex product pipeline buildup and enhance manufacturing capability and capacity, it said while suggesting a target of Rs 2,660.

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