Buy This Pharma Stock To Receive 25% Potential Return Amid Its Resilient Performance

Leading brokerage firm Geojit has given a buy call to the stock of Glenmark Pharmaceuticals Limited (GNP) for a potential upside of 25%. Geojit has suggested investors to buy the stock at it current market of Rs 388.45 apiece with a target price of Rs 485 apiece.

The Consolidated revenue up 5.6% YoY to Rs. 3,019cr in Q4FY22, driven by strong performance in India, Europe, and ROW (Redistribution of Wealth) business.

1. Stock outlook

The current market price of the stock is Rs 388.45 apiece (at the time of writing this report). The target price of the stock is Rs 485 as per Geogit's calculation that investors can fetch if they invest at the CMP. The potential gain will be 25%.

The stock has touched its 52-week high of Rs 690.95 apiece and 52-week low of Rs Rs 375 apiece. The book value per share is also getting better.

Current Market Price (CMP)	Target Price (TP)	Potential Gain
Rs 388.45	Rs 485	25%

2. Glenmark Pharmaceuticals Limited's Performance

In Q4FY22, consolidated revenue grew 5.6% YoY to Rs. 3,019cr (-4.9% QoQ), driven by strong performance in India, Europe, and ROW business. India business grew 7.4% YoY to Rs. 885cr with market share gains in cardiac and respiratory segments. GCC business grew 23.4% YoY to Rs. 62cr led by 30.0% YoY growth in Candid Cream and 95.0% YoY growth in La Shield.

Europe business grew 17.6% YoY to Rs. 497cr (+30.5% QoQ) driven by strong double-digit growth in key markets like Netherlands, Spain, and the Nordic countries. North America business fell 7.9% YoY to Rs. 738cr (-2.5% QoQ) while ROW business grew 18.1% YoY to Rs. Rs. 548cr.

3. Lower margins due to higher employee spends and other expenses

The company's gross margins declined 30bps QoQ to 65.9% (-130bps YoY) due to increase in cost of raw materials (+380bps QoQ, -110bps YoY) and purchases of stock in trade (-60bps QoQ, +180bps YoY). EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortizatio) fell 19.3% QoQ to Rs. 571cr Subsequently, Adj PAT (Profit After Tax) fell 29.9% QoQ to Rs. 156cr (-33.5% YoY).

4. Key accomplishments

In India, GNP launched 7 new products in Q4FY22 including the novel Zita Plus Pio, a 1st of its kind, offering world class affordable treatment to diabetic patients. In the US, GNP has been granted 9 ANDAs including 7 final & 2 tentative approvals.

Received FDA approval in the US for Ryaltris for SAR treatment in adults & pediatric patients & marketing approval in all 17 markets across EU and UK.

5. Valuation

According to Geojit, "GNP intends to grow its European business through geographical expansion in new markets and expanding its product portfolio. India business outlook looks promising with market share gains in cardio-vascular and respiratory segments.

New product launches, and ease of lockdown restrictions in global markets augers well for the company's performance in future. The stock is currently trading at attractive valuations. With a positive outlook, we upgrade our rating on the stock to BUY with a revised target price of Rs. 485 based on 11x FY24E Adj. EPS."

6. About Glenmark Pharmaceuticals Limited

Glenmark Pharma Ltd (GNP) is an India-based pharmaceutical company with commercial presence in more than 80 countries across the globe. GNP is primarily focused on generics, specialty and OTC businesses. The company has strong regional/country-specific presence in diabetes, cardiovascular and oral contraceptives. The market capitalization as of writing this report is 10,960.82 crore.

Disclaimer

The stock has been picked from the brokerage report of Geojit Financial Services Limited. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decisions.