Reduce Glenmark Pharmaceuticals, target price Rs 1,265: ICICI Securities

ICICI Securities has maintained a Reduce call on Glenmark Pharmaceuticals with a target price of Rs 1,265. The current market price of Glenmark Pharmaceuticals . is Rs 1365.9. Glenmark Pharma., incorporated in 1977, is a Mid Cap company with a market cap of Rs 38493.29 crore, operating in the Pharmaceuticals sector.

Glenmark Pharmaceuticals Ltd. key Products/Revenue Segments include Pharmaceuticals, Other Operating Revenue and Sale of services for the year ending 31-Mar-2023.



Financials
For the quarter ended 31-12-2024, the company has reported a Consolidated Total Income of Rs 3418.68 crore, down -1.57% from last quarter Total Income of Rs 3473.21 crore and up 33.95% from last year same quarter Total Income of Rs 2552.11 crore. The company has reported net profit after tax of Rs 348.03 crore in the latest quarter.

The company's top management includes Mr.Glenn Saldanha, Mrs.Cherylann Pinto, Mr.V S Mani, Mrs.B E Saldanha, Ms.Saira Ramasastry, Mrs.Vijayalakshmi Iyer, Mr.Rajesh V Desai, Mr.Dipankar Bhattacharjee. Company has Walker, Chandiok & Co.LLP as its auditors. As on 31-12-2024, the company has a total of 28 Crore shares outstanding.

Investment Rationale
ICICI Securities believes the US prospects of Glenmark may revive from H2FY26 and a timely approval of products from USFDA may lift US growth to ~14% in FY27E. It also plans to file Envafolimab by FY25-end and will launch this product across markets in FY26. In India, Glenmark has launched liraglutide brand (GLP-1) Lirafit which has been well-accepted by the market; however, the company is facing a supply crunch and expects to ramp-up production from a CMO site in Q4FY25. Management is in early talks for out-licensing of ISB 2001 used for treatment of multiple myeloma and a decision on it will be taken in CY25.Proceeds from out-licensing deals will be used to fund R&D needs of IGI; from FY26, IGI may not have to rely on Glenmark to fund its R&D.

At the end of Q3FY25, the company had net debt of Rs 1.1 billion mainly due to higher working capital (inventory of Rs 30.9 billion) as against net cash balance of Rs 2.6 billion at the end of Q2FY25. The stock currently trades at valuations of 28.6x FY25E and 23.7x FY26E earnings, and EV/EBITDA multiples of 16.2x FY25E and 13.8x FY26E, respectively.

I-Sec has cut revenue by ~1-2% and earnings by ~5-6% for FY25/26E. Enhanced free cash generation and maintaining a prudent balance sheet are essential avenues to be watched out in quarters ahead. On a low base, the brokerage expects 11.7%/38.7%/49% revenue /EBITDA /PAT CAGR over FY24?27E, with EBITDA margin at ~19.5% in FY27E. They maintain a REDUCE rating with lower target price of Rs 1,265 (earlier Rs 1,345), based on 22x FY26E EPS (unchanged). The Key upside risks are healthy launches, and faster recovery in the US.

Promoter/FII Holdings
Promoters held 46.65 per cent stake in the company as of 31-Dec-2024, while FIIs owned 23.51 per cent, DIIs 13.85 per cent.