Prabhudas Lilladher's research report on Glenmark Pharmaceuticals
1QFY21 earnings were mixed bag with revenue lower than our estimate however EBITDA, EBITDAM and PAT were higher due to lower SG&A (operating leverage). We continue to maintain SELL and retain TP of Rs365(12x PE of FY22E) as its core business continues to witness headwinds that may impact growth and margin. GNP is our top sell idea as 1) US derma portfolio (35% of US revenue) continues to witnesses 15-20% price erosion, 2) has thin product pipeline for US market with guidance of 8-10 new launches for FY21E and only 44 pending ANDA’s, 3) 60-65% of R&D spend towards low visibility specialty products, 4) insignificant EBITDA contribution from the new Monroe facility even with qualitative approvals (due to higher operating cost), 5)USD appreciation may increase gross debts and 6)LATAM and Semi-regulated markets may get impacted due to COVID and currency volatility.
Outlook
GNP guided that its EBITDAM 19% in 1QFY21 may likely be achievable for FY21E due to lower SG&A. We believe SG&A decline of 34% QoQ and 24% YoY looks unstainable, adding that once COVID cases decline its marketing and travelling costs are expected to get back to normal level.
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