Glenmark Pharma Q4 Results Review - Operating Performance Above Estimate; FY25 Outlook Better: Motilal Oswal

Motilal Oswal Report

Glenmark Pharmaceuticals Ltd. posted lower-than-expected revenue in Q4 FY24. However, it delivered better-than-expected profitability for the quarter, aided by an improved product mix and lower raw material costs. Having said this, the company has taken a considerable impairment charge on manufacturing facilities and certain intangibles (~Rs 32 billion) during the quarter.

We raise our earnings estimates by 17%/10% for FY25/FY26, factoring in:

1. new launches in the U.S. market,

2. increased market share in cardiac, derma, and respiratory products in the Domestic Formulation segment, and

3. a significant reduction in interest costs.

We value Glenmark Pharma at 21 times 12 months forward earnings to arrive at our target price of Rs 1,050.

Glenmark Pharma ended FY24 with an adjusted profit after tax of Rs 700 million, the lowest historically. However, new approvals in the U.S., changes in distribution model in the DF business, and financial deleverage would enable a sharp revival in earnings over FY24-26.

The current valuation adequately captures the improvement in earnings over the next two years. Reiterate Neutral.

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