22 July 2021
1QFY22 Results Update | Sector: Healthcare
Gland Pharma
Estimate change
TP change
Rating change
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CMP: INR3,802
TP: INR4,460 (+17%)
BUY
Complex products/newer markets to fortify growth pace
Progressing well on scaling up manufacturing of the vaccine
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
GLAND IN
164
623.2 / 8.4
3998 / 1701
24/62/-
1186
Financials & Valuations (INR b)
Y/E MARCH
2021 2022E 2023E
Sales
34.6
48.7
59.8
EBITDA
13.0
18.2
22.7
Adj. PAT
10.0 14.2 18.1
EBITDA Margin (%)
34.8 35.1 35.8
Cons. Adj. EPS (INR)
60.9 86.7 110.9
EPS Gr. (%)
29.0 42.2 28.0
BV/Sh. (INR)
360.9 447.5 558.4
Ratios
Net D:E
-0.5
-0.5
-0.5
RoE (%)
20.9 21.4 22.0
RoCE (%)
20.9 21.5 22.1
Payout (%)
0.0
0.0
0.0
Valuations
P/E (x)
62.4 43.9 34.3
EV/EBITDA (x)
45.4 32.3 25.4
Div. Yield (%)
0.0
0.0
0.0
FCF Yield (%)
0.6
0.3
1.4
EV/Sales (x)
17.1 12.1
9.7
GLAND’s 1QFY22 performance was ahead of our expectation, led by robust
revenue growth across all geographies. It is progressing well on scaling up
manufacturing of the COVID-19 vaccine. It is concurrently developing
products/undertaking capex related to complex product as well as
enhancing its geographical diversification.
We raise our FY22E/FY23E EPS estimate by 8% each to factor in: a) increased
reach as well as penetration in the RoW/India markets, b) better outlook for
the US market, c) higher offtake of Remdesivir/Enoxaparin, and d)
continued manufacturing efficiency driving better operating leverage. We
value GLAND at 35x its 12 months forward earnings to arrive at our TP of
INR4,460.
We remain positive on GLAND due to its: a) superior ramp-up in existing
products, b) healthy build-up in the complex product pipeline, c) ongoing
investment in the vaccine/Biological space, and d) enough scope for
inorganic growth as well. We reiterate our Buy rating.
Revenue grew 31% YoY to INR11.5b (est: INR9.9b) in 1QFY22.
India/RoW sales rose 77%/51% YoY to INR2.3b/INR2.2b (20%/19% of sales).
Sales in core markets grew 16% YoY to INR7b (61% of sales).
Gross margin contracted by ~1,030bp YoY to 53.5% as 1QFY21 had
benefitted from niche launches. GM fell 240bp QoQ due to changes in the
geographic mix.
EBITDA margin decreased at a lower rate (890bp YoY) to 37.8% (est.
37.1%) due to better operating leverage (employee cost/other expenses fell
120bp YoY/30bp YoY as a percentage of sales). In fact, EBITDA margin
expanded 90bp on a QoQ basis.
EBITDA was up 6% YoY to INR4.4b (est. INR3.7b)
Adjusted PAT grew at a higher rate (~12% YoY) to INR3.5b (est. INR2.8b),
aided by higher other income.
GLAND expects US sales to grow by 18-20% YoY in FY22.
It is working on 14 complex products, of which two/three will be filed in
FY22/FY23. It is developing 25-30 complex products over the next 2-3 years.
The management indicated a capex of INR5.7b for FY22, of which INR3b is
to be spent on the vaccine facility (INR1.2b spent till date). It has guided at
an overall capex of INR3.5b in FY23.
The management expects to sustain fixed asset turn at 3.5-3.6x, including
the upcoming investments in the Biological segments.
It has signed a contract with Hetero for the Sputnik vaccine. Trial batches of
the same were completed recently. Manufacturing would start from Sep’21.
Strong beat on earnings led by superior revenue growth
Shareholding pattern (%)
As On
Promoter
DII
FII
Others
Jun-21
58.1
12.1
10.4
19.3
Highlights from the management commentary
Mar-21
58.3
11.3
11.9
18.6
FII Includes depository receipts
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Tushar Manudhane - Research Analyst
(Tushar.Manudhane@MotilalOswal.com)
Bharat Hegde, CFA
(Bharat.Hegde@motilaloswal.com)