Neutral Glenmark Pharma; target of Rs 430: Motilal Oswal

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Motilal Oswal 's research report on Glenmark Pharma

Glenmark Pharma (GNP) ended FY20 in a third consecutive year of earnings decline, albeit at a lower intensity v/s previous years. The outlook is improving, led by cost reduction initiatives in R&D as well as other operating expenses. Reduced price erosion in the US base business, supported by new launches, would further strengthen the earnings trajectory going forward. - We raise our EPS estimate by 3%/8% for FY21/FY22 to factor better traction in the US business / Domestic Formulations and cost rationalization benefits. We value GNP on a 13x 12M forward earnings basis to arrive at price target of INR430. Maintain Neutral as the current valuation adequately factors an earnings upside over the medium term.

Outlook
We expect a 14% earnings CAGR over FY20-22, led by a sales CAGR of 11%/10% for India/Europe, better prospects for the US business, and improved profitability. We value GNP on a 13x 12M forward earnings basis to arrive at price target of INR430. While the earnings trajectory is improving, we are yet to see meaningful improvement in return ratios. Maintain Neutral.

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