IGI Logo

Revenue traction intact; BUY stays

Our view

Gland Pharma clocked yet another strong revenue quarter at 30% growth with US sales up a strong 20% yoy – in line with our expectation as outlined post Q1 FY22 numbers. Miss on gross margin is more a function of the mix rather than a direct fallout of higher input costs; albeit, we highlight strong operating leverage which restricted EBIDTA margin decline to ~100bps yoy.

A robust revenue performance allays any concerns on growth with a strong follow up likely in Q3 as key products like Ertapenem and Enoxaparin deliver US growth. Cash generation to improve in H2 as receivables days to normalize while tech transfer underway for Sputnik Lite. We marginally tweak estimates but retain BUY based on unchanged 35x FY24 EPS.

Result Highlights

* Revenues up 30% yoy driven by 25% growth in core markets of US & Europe; US sales up a strong 21% yoy

* ROW markers up 60% yoy while India business up 19% yoy

* Gross margin declined ~350bps yoy though not a direct fall out of RM costs as cost of goods is a function of mix between contract manufacturing (100% gross margin), owned ANDA sales and tech transfer

* Slower rise in other costs cushioned EBIDTA margin decline to ~100bps yoy

* Cash flow generation to improve as receivable days normalize in H2.

Valuation

We retain TP of Rs4,500 based on 35x FY24 EPS on back of 1) strong revenue momentum beyond FY23 which should help translate in to operating leverage offsetting some of the erosion due to lower gross margin in the near term and 2) medium levers remain intact in the form of biosimilars manufacturing and monetization of complex generics pipeline.

To Read Complete Report & Disclaimer Click Here

Please refer disclaimer at https://yesinvest.in/privacy_policy_disclaimers
SEBI Registration number is INZ000185632

Above views are of the author and not of the website kindly read disclaimer