Buy Gland Pharma Ltd for the Target Rs 3,080 by Motilal Oswal Financial Services Ltd
US, EU strength drives 5-9% beat
* Gland Pharma (GLAND) delivered a better-than-expected financial performance in 1QFY27, with 5%/9%/9% beat on revenue/EBITDA/PAT. The performance was driven by robust growth in the US and EU markets, whereas other core markets and ROW saw subdued performance.
* Recent product launches, along with volume growth in existing products, boosted US and EU performance for the quarter.
* The performance of other core markets and ROW was muted due to a lower offtake for certain products.
* Cenexi has been slightly EBITDA positive for the past three quarters now and is expected to reach high-single-digit EBITDA margin in FY27E.
* GLAND recently announced an agreement with a global pharma company, under which the manufacturing would be done from Gland’s site and subsequent packaging would be done from Cenexi site, providing full-service CDMO work.
* We raise our earnings estimates by 3%/4% for FY27/FY28, factoring in:
a) a healthy pace of differentiated product launches in the US and European markets
b) currency depreciation tailwinds.
* We value GLAND at 30x 12-month forward earnings to arrive at a TP of INR3,080. We expect a 21% earnings CAGR over FY26-28 on the back of complex injectables, peptides, GLP-1 and liposomal technologies, rather than conventional sterile manufacturing. Reiterate BUY.
Healthy revenue growth; operating leverage drives margins YoY
* 1QFY27 revenue grew 19.6% YoY to INR18b (our estimate: INR17.1b).
* Gross margin (GM) remained stable YoY at 65.3%.
* EBITDA margin expanded 275bp YoY to 27.2% (our estimate: 26.3%) as staff expenses/other expenses fell 245bp/40bp as % of sales.
* EBITDA grew 33% YoY to INR4.9b (our estimate: INR4.5b).
* Adj. PAT grew 47% YoY to INR3.2b (our estimate: INR2.9b).
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