Gland Pharma plunges to 52-week low as Q4 net profit slumps 72.5%, revenue drops 29%

Shares of Gland Pharma nosedived nearly 18 percent in early trade on May 19, hitting their lowest level in 52 weeks, a day after the company reported a dismal set of earnings for the fourth quarter.

The drugmaker’s net profit for the quarter plummeted 72.5 percent on year to Rs 78.6 crore on the back of a nearly 29 percent decline in revenue.

The topline slumped in Q4 due to high base on account of COVID sales and a shutdown of production line in the Pashamylaram Penems facility for line upgradation. On top of that, softer off-take in the RoW (Rest of the world) market due to tender seasonality and reduced business from domestic B2C division were other reasons attributed to the drugmaker’s dismal revenue beat.

The operational performance also suffered as EBITDA margin contracted sharply to 21.5 percent in January-March period, down from 31.6 percent in the year-ago period.

At 09.48 am, shares of Gland Pharma were trading with a cut of 19.61 percent at Rs 1,070.80 on the National Stock Exchange. The scrip also hit a 52-week low of Rs 1,065.60 intraday.

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Around nine lakh shares of the drugmaker changed hands on the exchanges, as against the one-week daily traded average of two lakh shares.

Brokerage firm Motilal Oswal Financial Services cut its earnings estimate for the drugmaker by 36 percent/22 percent for FY24E/FY25E factoring in a reduction in scope of business from a bankrupt customer, gradual revival in business due to shift of business by another customer to alternate supplier, and reduced share of profit due to higher competition in existing product portfolio.

“While the multiple headwinds on revenue and operational cost have hit its FY23 performance, we expect a slow recovery over the next 12-15 months for Gland Pharma. The recovery is likely to be aided by new launches in China/other regulated markets, newer contracts in CDMO (Contract Development and Manufacturing Organization) segment and inventory rationalization of existing products,” MOFSL stated in its report. The broking firm has a ‘buy’ rating for the stock, with a target price of Rs 1,460.

However, Kotak Institutional Equities has a much bearish outlook for the pharma company as it downgraded the stock to ‘sell’ along with a cut of over 19 percent to Rs 1,075. Despite Gland’s near-term outlook being challenging the brokerage believes the lack of visibility regarding normalcy in sales and margins is a bigger worry.

Moreover, KIE expects growth and margins to reset downward to a new normal for Gland Pharma, owing to continued challenges on multiple fronts.

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