Buy Glenmark Pharma Ltd for the Target Rs 2,570 by Motilal Oswal Financial Services Ltd
India and US lead the recovery
New launches and pipeline expansion underpin the next phase of earnings growth
* Glenmark Pharma (GNP) delivered in-line revenue for 1QFY27. However, it delivered a 7% and 10% miss on EBITDA and PAT for the quarter, respectively. Overall performance was driven by superior performance in the domestic branded formulation (DF), consumer care, North America (NA), and emerging markets businesses. The EU business experienced a moderation in growth during 1QFY27.
* GNP continues to witness strong traction in core therapies, driving betterthan-industry growth in the DF segment. New launches and MR additions provide scope for sustainable growth momentum.
* The core business growth in NA has picked up on the back of new launches. The pace of approvals and subsequent launches of limited-competition products is expected to continue over the remaining quarters of FY27.
* EU performance was affected to some extent in 1QFY27, after growth revival in 2HFY26. GNP is implementing efforts with an aim to revive growth from FY28 onwards.
* We slightly tweak down our FY27 estimates by 2.5%, factoring in: a) the impact of raw material price hikes, considering the global political turmoil, and b) an increase in R&D and marketing spend. We value GNP at 25x 12M forward earnings, add NPV of INR290 related to ISB2001, and arrive at a TP of INR2,570.
* Following a strategic course correction, GNP has returned to a superior growth path in India. It continues to strengthen its respiratory franchise in the US through commercial launches while building its product pipeline. USFDA compliance and the injectable product portfolio from the Monroe site are expected to provide additional growth levers going forward. Supported by the low base of FY26, we build in PAT of INR21b/INR25b for FY27/FY28, compared with INR5.7b in FY26. Reiterate BUY
Healthy operational performance with margin expansion
* GNP sales grew 23.1% YoY to INR40.2b (our est. INR40.9b).
* Gross margin expanded 10bp YoY to 69%.
* EBITDA margin expanded 220bp YoY to 20% (our est. 21.2%), majorly due to a reduction in R&D expenses (down 90bp YoY) and other expenses (down 110bp YoY) as % of sales.
* R&D for the quarter was INR2.5b (6.2% of the sales).
* EBITDA increased 38.6% YoY to INR8b (our est. INR8.7b).
* PAT stood at INR4.8b, up 53.8% YoY (our est.: INR5.4b)
Reiterate BUY
* We slightly tweak down our FY27 estimates by 2.5%, factoring in: a) the impact of raw material price hikes, considering the global political turmoil, and b) an increase in R&D and marketing spend. We value GNP at 25x 12M forward earnings, add NPV of INR290 related to ISB2001, and arrive at a TP of INR2,570.
* Following a strategic course correction, GNP has returned to its superior growth path in India. It continues to strengthen the respiratory franchise in the US through commercial launches while building its product pipeline. USFDA compliance and the injectable product portfolio from the Monroe site are expected to provide additional growth levers going forward. Supported by a low base of FY26, we build in a PAT of INR21b/INR25b for FY27/FY28, compared to INR5.7b in FY26. Reiterate BUY.
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