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Gland Pharma, a leading pharmaceutical company, experienced a significant surge in its stock price on November 5, following the release of its July-September quarterly earnings. The stock soared over 13 percent, signaling a positive outlook for the company's future performance. This surge in stock price comes after a three-month decline of 24 percent, suggesting that investors are now optimistic about Gland Pharma's prospects.
The positive sentiment stems from the belief among brokerages that the worst for the drugmaker might be behind. Despite a 16 percent year-on-year decline in net profit to Rs 163.5 crore and a modest 2 percent revenue increase to Rs 1,406 crore in Q2, the management expressed confidence in the company's future. Srinivas Sadu, Executive Chairman and CEO, stated that the core regulated markets, particularly the United States, continue to perform well and the overall performance is in line with expectations. He highlighted their strategic priorities of entering new markets and building a foundation for future growth.
Kotak Institutional Equities (KIE) expressed confidence in Gland Pharma's future, upgrading the stock to an 'add' call from its previous 'reduce' rating and increasing its price target by over 11 percent to Rs 1,625. KIE believes that Gland Pharma's earnings have bottomed out and the company's biologics contract development and manufacturing organization (CDMO) business is entering a pivotal growth phase after an extended period. They are particularly optimistic about the strategic partnership signed with Dr Reddy's Laboratories in the biologics CDMO sector, which they believe will leverage Gland Pharma's advanced biologics manufacturing facility in Hyderabad.
However, KIE will be closely monitoring Gland Pharma's proposed B2C strategy in regulated markets under its new CEO, acknowledging the uncertainty associated with the CEO's limited experience in these key pharmaceutical regions. KIE will also keep an eye on growth in the Rest of World (RoW) markets. The brokerage raised Gland Pharma's FY25-27 EBITDA estimates by 2 percent each, reflecting their confidence in the company's ability to achieve higher base business margins.
While Kotak Institutional Equities sees a positive outlook for Gland Pharma, Goldman Sachs holds a contrasting view, retaining its 'sell' call on the stock with a price target of Rs 1,450. Goldman Sachs believes that incremental growth for Gland Pharma's base US business will come at the cost of margins. Jefferies, on the other hand, assigned a 'hold' call for Gland Pharma, but cut its price target to Rs 1,840 per share, citing that the company's Q2 performance met expectations against a backdrop of muted expectations.
Source: Gland Pharma stock zooms 13% after Q2 results, brokerages see worst behind