Published on 25/06/2019 10:09:47 AM | Source: Emkay Global Financial Services Ltd

Hold Glenmark Pharmaceuticals Ltd For Target Rs.625 - Emkay Global


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FY20 guidance indicates moderate outlook

* Revenue was in line but reported EBITDA was 10% below estimate. EBITDA was impacted by higher-than-usual other expenses owing to launch expenses of Remogliflozin in India and restructuring expenses (~200bps margin impact).

* The US business was weak (-10% QoQ) on gMupirocin API stock-out (~25% decline in unit sales, resolved now) and steep erosion in the derma portfolio (~10% QoQ). FY20 guidance of mid-single digit growth in the US is disappointing, given a low base.

* FY20 sales growth guidance stands at 10-15%, with the US likely to grow at mid-single digits, and the rest of the business between 15% and 20%. Margins are guided to expand with lower absolute R&D spends and a reduction in manpower-to-sales ratio.

* We resume coverage with a Hold rating and a TP of Rs625, valuing the stock at 15x FY21E EPS. With a tepid outlook, meaningful debt reduction is unlikely in the medium term, except for one-off milestone incomes or non-core asset divestments.


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