Buy Glenmark Pharma Ltd For Target Rs.2,590 by Choice Institutional Equities Ltd
Near-term Moderation Masks an Intact Growth Story
We continue to maintain a positive view on GNP, supported by product launches, the scale-up of recently-launched and existing products and an improving product mix. While revenue growth is likely to moderate to the high single digit and margin is expected to witness a planned contraction in FY27E, we believe this largely reflects the high base of FY26, which included the AbbVie settlement. The underlying demand environment and core business growth remain intact. In addition, with R&D expenditure expected to normalise and new products scaling up, we expect stronger growth from FY28E. We maintain our FY27E/FY28E earnings estimate and reiterate our target price of INR 2,590 with a ‘BUY’ rating. A PEG of 0.8x further gives comfort to our valuation.
Strong YoY Growth across Metrics
* Revenue grew 23.1% YoY / 6.6% QoQ to INR 40,185 Mn (vs. CIE estimate: INR 41,344 Mn).
* EBITDA grew 38.6% YoY / 5.5% QoQ to INR 8,048 Mn (vs. CIE estimate: INR 8,476 Mn); margin expanded 225 bps YoY and contracted 20 bps QoQ to 20.0% (vs. CIE estimate: 20.5%).
* APAT increased 134.9% YoY and declined 18.4% QoQ to INR 4,829 Mn (vs. CIE estimate: INR 5,437 Mn).
From Landmark Deals to Product Scale-up: Growth Drivers Remain Intact
The company continued to deliver a healthy growth in Q1FY27. However, we expect FY27E growth to moderate due to a subdued performance in North America, as FY26 benefitted from a high base following the inclusion of ISB 2001 revenue. Nevertheless, we forecast a revenue CAGR of 10.6% in FY26–29E, supported by diversified growth across key geographies.
* India: We expect India to remain the primary growth driver, supported by continued outperformance as compared to the IPM, along with new launches in the oncology and respiratory segments. We expect the business to deliver midteens growth.
* North America: GNP launched 9 products in this quarter, with FloVent benefitting from 180-day exclusivity. We expect high single-digit growth in FY27E, as these products continue to scale up, with stronger growth anticipated from FY28E onwards.
* Europe: The company continues to witness an increasing contribution from its branded portfolio, while 8 products were launched in this quarter, supporting growth.
* Emerging Markets: Russia continues to remain a key growth market, while Latin America and the Middle East & Africa are expected to sustain their growth trajectory. In addition, Ryaltris has been launched in China and Thailand, providing incremental growth opportunities
Planned Investments to Temporarily Weigh on Margin
FY27E is expected to witness a planned contraction in EBITDA margin, as FY26 benefitted from the one-off AbbVie settlement. We view the higher investments as essential to strengthening the company's long-term growth pipeline rather than a structural margin concern. The management expects EBITDA margin to remain in the 21–22% range in FY27E.
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