1FY20 result highlights
Impact on financials: Reduce FY20/21 earnings by 18/13% to bake in lower sales revenues and reduced profitability.
Valuations & view
While the potential of Glenmark’s R&D driven growth model has been compelling, company’s volatile earnings trajectory, inability to generate free cash along with frequent disappointments on its multiple guidance measures have been dampeners. Recent case in point is potential delay in GLS stake sale and reversals wrt Ryaltris / US branded derma strategies. On the core business front, Glenmark struggles to grow its US business (key driver for profitability along with India) despite receipt of multiple niche approvals. While post sharp correction in last few months, Glenmark’s valuations are attractive at ~11.5x FY21E, we would prefer to await delivery on the mgt guidance on debt reduction and free cash generation to review our rating. Maintain Neutral with TP of Rs470 (13x FY21E PER).
Glenmark Pharmaceuticals is engaged in the discovery of new molecules, both NCEs (new chemical entity) and NBEs (new biological entity), with seven molecules in various stages of clinical development & pre-clinical development. Co.'s Drug Discovery business primarily focuses in the areas of inflammation, metabolic disorders and pain. Co.'s Formulations business focuses on therapeutic areas such as dermatology, anti-infectives, respiratory, cardiac, diabetes, gynecology, CNS, and oncology. Co.'s Glenmark Generics Ltd. business focuses on developing, manufacturing, selling and the distribution of generics through wholesalers, retailers and pharmacy chains.
IDFC Securities Ltd., a subsidiary of the Infrastructure Development Finance Company (IDFC) wherein the Government of India holds a 20% interest, is India's leading equities broker catering to most of the prominent financial institutions, both foreign and domestic investing in Indian equities. A research team of experienced and dedicated experts ensures the flow of critically investigated stock ideas and portfolio strategies for our clients. Our coverage spans across various growth sectors such as agriculture, automobiles, Consumer Goods, Technology, Healthcare, Infrastructure, Media, Power, Real Estate, Telecom, Capital Goods, Logistics, Cement amongst other sectors. Our clients value us for our strong research-led investment ideas, superior client servicing track record and exceptional execution skills.
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