Gland Pharma soars 13% on better than expected Q2 performance

Despite increased EBITDA loss at Cenexi, the overall consolidated EBITDA margin was better-than-expected at 21.1%, led by better segmental mix and controlled operational cost for the quarter.

Shares of Gland Pharma rallied 13 per cent to Rs 1,819.95 on the BSE in Tuesday’s intra-day trade in an otherwise subdued market after the company posted better-than-expected operational performance for the second quarter ended September 2024 (Q2FY25), as reported base business earnings before interest, tax, depreciation, and amortization (EBITDA) margin was stable at 34 per cent.

 

Despite increased EBITDA loss at Cenexi year-on-year (YoY)/quarter-on-quarter (QoQ) and a lower share of the milestone income, the overall consolidated EBITDA margin was better-than-expected at 21.1 per cent, led by better segmental mix and controlled operational cost for the quarter.

 

The company’s core regulated markets, particularly the United States, continue to perform well. The overall performance is in line with expectations. Looking ahead, the company remains focused on its strategic priorities, which include entering new markets and building a solid foundation for future growth, the management said.

 

Gland Pharma’s Q2FY25 revenue grew 2.4 per cent YoY to Rs 1,406 crore. Adjusted profit after tax declined 16 per cent YoY to Rs 163.5 crore due to tax expense. EBITDA margin contracted 250bp YoY to 21.1 per cent, led by higher employee costs (up 130bp YoY as per cent of sales) offset by lower other expenses on a YoY basis by 180bp as a per cent of sales.

 

On Cenexi’s outlook, Gland said despite these near-term headwinds, the company continues to strive to achieve its short-term outlook: a positive EBITDA for Q4 of FY25. The management maintains its goal of a positive EBITDA for the next fiscal year, driven by an increase in revenue above the €200 million threshold.

 

With two years of earnings decline in FY23/FY24, Motilal Oswal Financial Services (MOFSL) believes the earnings are largely at trough and expected to witness revival over FY25-27. The brokerage firm expects 20 per cent earnings compound annual growth rate (CAGR) over FY25-27, led by increased volume offtake of base products such as enoxaparin, EBITDA break-even of Cenexi and subsequent better operating leverage,  additional business in the biologics segment, and commercialization of new products in the core market segment.

 

However, MOFSL cut earnings estimate by 8 per cent/10 per cent/7 per cent for FY25/FY26/FY27 to factor in the slowdown in the US sales on account of a delay in the potential approval and subsequent launches, gradual up-tick in the biologics business, and lower business due to a temporary setback at the Belgium site of Cenexi.

 

Considering this outlook and stock trading at 16x/14x FY26/FY27 EV/EBITDA and 27x/22.5x FY26/FY27 PE, the brokerage firm reiterates BUY rating on Gland with a target price of Rs 1,970 per share.