Buy Glenmark Pharmaceuticals, target price Rs 580: Nomura, India

Nomura, India has buy call on Glenmark Pharmaceuticals with a target price of Rs 580. The current market price of Glenmark Pharmaceuticals is Rs 431.2. Time period given by analyst is 1 year when Glenmark Pharmaceuticals price can reach defined target.

Glenmark Pharmaceuticals, incorporated in the year 1977, is a Mid Cap company (having a market cap of Rs 12152.98 Crore) operating in Pharmaceuticals sector.

Financials
For the quarter ended 30-09-2022, the company has reported a Consolidated Total Income of Rs 3472.68 Crore, up 17.30 % from last quarter Total Income of Rs 2960.44 Crore and up 10.79 % from last year same quarter Total Income of Rs 3134.38 Crore. Company has reported net profit after tax of Rs 278.67 Crore in latest quarter.

The company’s top management includes Mr.Glenn Saldanha, Mr.D R Mehta, Mrs.B E Saldanha, Mr.Sridhar Gorthi, Mr.Bernard Munos, Mr.Dipankar Bhattacharjee, Dr.Brian W Tempest, Mr.Rajesh V Desai, Mr.V S Mani, Mrs.Cherylann Pinto, Ms.Saira Ramasastry. Company has Walker, Chandiok & Co.LLP as its auditors. As on 30-09-2022, the company has a total of 28 Crore shares outstanding.

Investment Rationale
Considering the drop in US sales and inflationary pressure, the brokerage has slashed its sales/EBITDA estimates for FY23/24F by 0.5%/2.4% and13.8%/11.8%. Earnings estimates are also cut significantly by 32%/43% to factor in significantly higher tax rate and depreciation. Consequently, Nomura has cut the stock's Dec-23 target price to Rs 580 from the earlier target price of Rs 757.

Nonetheless, buy rating on the stock is retained as the brokerage thinks that Street expectations are low. The stock trades at FY23F EV/EBITDA of 7.4x, which is at ~50% discount to industry peers. Cash flow improvement and value creation at Ichnos can improve the valuation multiple.

Promoter/FII Holdings
Promoters held 46.65 per cent stake in the company as of 30-Sep-2022, while FIIs owned 28.54 per cent, DIIs 10.68 per cent.