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Building Global Scale: Capacity Push, Complex In-Licensing, & CDMO Momentum

Est. Vs. Actual for Q2FY27: Revenue – MISS; EBITDA – MISS; PAT – MISS

Changes in Estimates Post Q2FY27

FY27E/FY28E: Revenue: 0%/0%; EBITDA Abs: -2%/-2%; PAT: -1%/-2%

Recommendation Rationale

* Strong Core: Consolidated revenue grew 23% YoY to Rs 1,834 Cr, with the core Critical Injectables business delivering Rs 1,011 Cr (+18% YoY). Growth was powered by 42% YoY expansion in the US from new launches, including Sugammadex, partially offset by ROW tender delays in Saudi Arabia. Group adjusted EBITDA margin stood at ~27%.

* Cenexi Operational Progress Gaining Traction: Cenexi recorded Q2FY27 revenue of €41 Mn with an EBITDA loss of €6 Mn due to scheduled summer shutdowns; profitability is slated to rebound from Q3, keeping full-year guidance of ~€200 Mn with high single-digit margins intact. Mr. Ajay Sahni joined as President to drive transformation, while Gland expanded CDMO capabilities by securing contracts for microsphere and respiratory products.

* Strategic & Capex Outlook: From a capex standpoint, the Board approved an incremental Rs 1,000 Cr brownfield expansion at Pashamylaram for three isolator vial lines (operational by FY30), bringing total 4-year planned Capex to ~Rs 5,000 Cr alongside the ongoing Rs 2,000 Cr program and Vizag greenfield. Management reiterated its 15% constant currency revenue growth guidance for FY27. On pipeline expansion, Gland in-licensed a second longacting injectable from China addressing a $2 Bn patent-protected market, while GLP-1 CDMO tech transfers advance toward commercialization in H1FY28. Incoming CEO Deepak Sapra takes charge on 16 th Nov’26.

Sector Outlook: Positive Company

Outlook & Guidance: Management reiterated that Gland Pharma is on track to deliver 15% constant currency revenue growth in FY27, driven by new launches and volume expansion, with consolidated adjusted EBITDA margins holding steady at ~27–28%. Growth is supported by key drivers, including

(1) Four US launches (including Sugammadex) alongside 10 ANDA approvals

(2) Robust segment expansion, with CDMO surging 31% YoY and Critical Injectables growing 18% YoY

(3) Cenexi's expected second-half profitability turnaround toward ~€200 Mn annual guidance following Q2 summer shutdown impacts (€41 Mn revenue), and

(4) Strategic CDMO contract momentum across microspheres, respiratory therapies, GLP-1 transfers, a $2 Bn in-licensed China asset, and an expanded ~Rs 5,000 Cr Capex roadmap. Current Valuation: PE 35x for FY29E Earnings (Earlier Valuation: 30x FY28E)

Current TP: Rs 3,890/share (Earlier TP: Rs 2,930/share)

Financial Performance

Gland Pharma reported a strong Q2FY27, reinforcing confidence in its near- to medium-term earnings trajectory. Consolidated revenue grew 23% YoY to Rs 1,834 Cr, driven by broad-based growth across its base business and continued acceleration in the CDMO segment. Reported EBITDA increased 54% YoY to Rs 484 Cr (adjusted EBITDA of Rs 503 Cr, margin ~27%), supported by operational efficiency despite higher R&D spending of Rs 108 Cr. Reported PAT stood at Rs 291 Cr, reflecting a sharp 58% YoY growth, with PAT margin reaching 15.9%. Strong execution, favorable product mix, and operating leverage continue to drive long-term corporate earnings expansion. The U.S. business grew 47% YoY to Rs 1,180 Cr, while the Europe market expanded 30% YoY to Rs 371 Cr, driven by volume growth and recent product launches. Cenexi revenue stood at €41 Mn (temporarily impacted by planned summer shutdowns), with the segment set to return to profitability from Q3 onward, toward achieving sustainable high single-digit operational margins.

Outlook

The company remains optimistic about volume expansion and sustained growth, supported by new product launches and a strategic focus on complex injectables and CDMO platforms. Continued investments in ready-to-use (RTU) infusion bags addressing a $640 Mn US market, advancing GLP-1 tech transfers, and secured microsphere and respiratory contracts are expected to strengthen its growth trajectory. Long-term visibility is further reinforced by Cenexi’s expected H2 profitability turnaround, execution of an expanded ~Rs 5,000 Cr four-year Capex roadmap, and high-value complex product in-licensing.

Valuation & Recommendation

We maintain our BUY rating, driven by improving earnings visibility, strong execution in the base business, and solid operating leverage. The company’s focus on high-value complex injectables, advancing GLP-1 tech transfers, and Cenexi’s expected H2 operational turnaround post-summer shutdowns provide a multi-year growth runway. Additionally, robust ~27% adjusted EBITDA margins (28% in H1) and strategic CDMO contract wins in microspheres and respiratory platforms reinforce confidence in sustained profitability. We expect the company to sustain strong growth through FY27, supported by recent US launches, CDMO acceleration, and execution of its expanded ~Rs 5,000 Cr Capex roadmap. Reflecting these positives, we maintain our target price of Rs 3,890/share, implying an upside potential of ~23% from the CMP.

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SEBI Registration number is INZ000161633