Glenmark Pharma wilts 3% on muted Q4 show, CLSA downgrades to sell

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Elara Capital which has reduce rating on stock said FY19 operating performance remained weak, given lack of meaningful US sales.





Glenmark Pharma shares fell 3 percent intraday on May 31 as global brokerage house CLSA downgraded the stock after March quarter earnings missed analyst estimates.

The stock was quoting at Rs 544.40, down Rs 10.95, or 1.97 percent on the BSE at 11:01 hours. The scrip has wilted 15 percent in the last one month.

CLSA downgraded Glenmark rating to sell from buy and slashed price target by 32 percent to Rs 500 from Rs 740 after cutting FY20-21 EPS estimates by 22-27 percent.

The brokerage said the fourth quarter numbers were below estimates due to a miss on US revenue and Higher R&D/SG&A spends.

"We expect the investment phase to remain high over the next two years. High investment phase will keep earnings outlook subdued and benefits of current investments will only reflect FY22 onwards," it added.

The drug maker's Q4 profit grew by 6.6 percent to Rs 161.6 crore and revenue increased by 12.4 percent to Rs 2,564 crore YoY. Operating profit jumped 11.4 percent year-on-year to Rs 364.13 crore and margin contracted 14 bps to 14.2 percent in quarter ended March 2019.

Numbers were far below analyst estimates. CNBC-TV18 estimated profit at Rs 227.5 crore, revenue at Rs 2,622.8 crore and EBITDA at Rs 450 crore with margin at 17.2 percent for the quarter.

Elara Capital, which has reduced the rating on the stock, said FY19 operating performance remained weak, given lack of meaningful US sales. Despite corporate actions initiated to reduce debt, net debt remains high at 2.2x net debt-EBITDA.

The brokerage house cut its FY20 EPS estimates by 6 percent and FY21 by 4 percent, as a result, it slashed price target to Rs 585 from Rs 605.

Visibility on unlocking value of its innovative R&D pipeline and stake sale in its API business will be key triggers.


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