EUR 120.00 For Business Accounts Only

MOSL: GLAND PHARMA (Buy)-Multiple levers at play; valuations attractive

(GLAND IN, Mkt Cap USD5.6b, CMP INR2644, TP INR3700, 40% Upside, Buy)

 

• After delivering 27% earnings CAGR over FY17-22, GLAND is well-placed to sustain its earnings growth momentum over the next three-to-five years
• It has been enhancing its offerings by adding complex products to its portfolio, scaling the product at the global level, expanding capacity to aid manufacturing, as well as increased backward integration.
• While constraints on availability of certain materials may hinder performance over the near term, GLAND is in good stead for consistent performance over the next three-to-five years.
• The 40% correction over the past 10-12 months, despite healthy earnings growth, provides sufficient cushion on the valuation front. The stock is trading at 30x FY23E EPS of INR89 and 23x FY24E EPS of INR113.
• Given its superior business model, consistent compliance, strong return ratios, and surplus cash for inorganic opportunities, we value the stock at 33x 12-month forward earnings to arrive at our TP of INR3,700. We reiterate our Buy rating.

 

Efforts toward global leverage of the portfolio

• In addition to successful commercialization of products in the US market, GLAND is expanding its portfolio offerings in non-US markets as well. In FY22, it delivered a sales growth of 47% YoY in EU/Australia/Canada and 54% in RoW markets.
• GLAND extended its Enoxaparin Sodium, Heparin Sodium, Rocuronium Bromide, and Dexmedetomidine business, driving growth in RoW markets.
• Even in India, Enoxaparin Sodium contributed meaningfully to growth, in addition to: a) the successful launch of Caspofungin Acetate, and b) higher offtake of Ertapenem.
• It commands 10% market share globally in case of Enoxaparin Sodium and has enough scope to gain market share on the back of a cost efficient manufacturing process and ease of raw material availability.