Glenmark Pharma Q3 Results Review -India Business Re-Set Drags Earnings: Motilal Oswal

Motilal Oswal Report

Glenmark Pharmaceuticals Ltd. delivered a miss on its Q3 FY24 earnings, largely due to the inventory reset in the domestic formulation business and an inferior show in the U.S. generics segment. The company has completed its remediation measures at Monroe and would be requesting the U.S. FDA for a re-inspection.

We cut our FY24/FY25/FY26 estimates by 94%/4%/4% to factor in:

1. the significant reduction in the domestic formulation business due to stock consolidation and inventory rationalisation, and

2. a prolonged delay in abbreviated new drug application approvals due to regulatory issues.

This is partly offset by:

robust traction in the Europe business. We value Glenmark Pharma at 17 times 12 months forward earnings to arrive at our target price of Rs 820.

Glenmark Pharma is implementing efforts to improve outlook in its core markets through:

1. the new launches/operational efficiency in the DF segment,

2. filing complex respiratory products in the US segment, and

3. resolving regulatory issues at its manufacturing site.

However, we reiterate our Neutral rating as the current valuation factors in the upside in the earnings.

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