Motilal Oswal has given Neutral recommendation for Glenmark Pharma with a target price of Rs. 580 in its research report issued on May 31, 2021
Motilal Oswal’s research report on Glenmark Pharma
Glenmark Pharma (GNP) delivered marginally lower-than-expected earnings in 4QFY21, led by subdued growth in the Domestic Formulation (DF) segment, flat RoW sales, and decline in the LatAm business. However, the outlook in the DF segment remains promising, aided by COVID-19 drugs. The Europe business is expected to deliver healthy growth on the back of niche launches and recovery in the base business, with the easing of lockdown restrictions. GNP intends to reduce net debt through free cash flow from its core operations as well as fund raising via the Glenmark Life Sciences IPO. We raise our FY22E/FY23E EPS estimate by 8% to factor in: a) strong growth in the DF segment, b) stable price erosion in the US base business, c) niche launches in Europe and d) lower financial leverage.
We continue to value GNP at 14x 12-month forward earnings to arrive at our TP of INR580. We maintain our Neutral rating as current valuations adequately factors potential upside in earnings over the next two years.