Brokerages see over 30% upside in Gland Pharma; here's why

Specialized injectables manufacturer Gland Pharma continues to create buzz on Dalal street after it received the approval for production of Sputnik vaccine for Covid-19  and posted a strong Q4 performance.

The company’s net profit stood at Rs 260.4 crore, up 34% year-over-year. Revenue from operations surged 40% to Rs 887.7 crore during the period under review. The margins stood at 40%, slightly lower than 42% in the year-ago quarter, primarily due to higher R&D expenses.

The forward prospects too remain upbeat backed by strong product portfolio. The company has sought approval for about 50 abbreviated new drug applications (ANDA) from the US Food and Drug Administration.

In the afternoon trade the stock was trading 9.73% higher at Rs 3,064.90 apiece. Analyst on the street are gung ho on the counter as the management has indicated that it has purchased assets from a biologics company for Rs 90 crore and will be spending around Rs 180 crore additionally to develop & manufacture vaccines. It plans to start manufacturing of Sputnik V by 3QFY22. Post vaccine, Gland will repurpose facilities for Biosimilar business.

Haitong | Target price: Rs 3,660 | Upside: 31%

Gland’s financial ratios are superior to both B2B (CMO) and front-end peers. Moreover, there is also a multi-year runway for growth with an abundant market opportunity in the injectable and biopharma space. Thus, we believe Gland’s PE is likely to remain on the up-trend. Gland at 30x PE on our Mar-23 EPS of Rs99.8 (Rs 95.2 previously) and add an option value of Rs 664/sh (unchanged) for its bio-pharma foray. We assign a target price of Rs 3,660/sh (previously Rs 3,520/sh)

Sharekhan | Target price: Rs 3,420 | Upside: 22%

The recent arrangement for manufacturing 252 mn doses of Sputnik V vaccine with Russia’s RDIF is a crucial development for Gland as it opens up new growth avenues and also takes the company closer to its strategy of entering the Biosimilar space. Gland has acquired assets of a Biopharma company to cater to the vaccine arrangement and Post the completion of the contract, the facility could be utilized as a CDMO / CMO plant for bio-pharma, with a probability of contracts coming in from the parent company as well. In addition to this the business in the core markets as well as in the Rest of the World markets are well placed to harness the growth opportunities. A strong pipeline of new launches in the US with a strong product filling plan, focus on geographic expansion and growth opportunities in the Rest of the World markets, coupled with strong capabilities and extensive product portfolio supported by a sturdy R&D muscle points at the company’s ability to consistently commercialize its product pipeline and gain market share, further, a high vertical integration would result in operating efficiencies leading to OPM expansion

Motilal Oswal | Target price: Rs 3,280 | Upside: 21%

Gland Pharma is building multiple levers by improving growth prospects in the Biosimilars/Vaccine space, building of a complex product pipeline like peptides, and enhanced business opportunity in the RoW market via entry into newer markets, increased penetration, and superior product lifecycle management.

(Disclaimer: The recommendations in this story are by the respective research and brokerage firm. Money9 & its management do not bear any responsibility for their investment advice. Please consult your investment advisor before investing.)