Global brokerage firm Jefferies upgraded the stock to buy from underperform with an increased price target of Rs 1,640 from Rs 1,065 earlier. Bernstein also gave an outperform rating on Gland Pharma, saying that the Q1 numbers point towards early signs of revival in base business.
Bernstein has a target price of Rs 1,742 on the stock.
“We upgrade Gland Pharma to Buy due to improving base business outlook, margin profile, stable pricing environment and possibilities of new business opportunities through Cenexi. We increase FY25-26 EPS by 5-7% post 1Q and estimate 17% EPS Cagr over FY23-26E,” Jefferies said.
During the quarter, Gland’s gross margin was up 620bp YoY to 52.5% due to lower raw material costs.
Improving pricing environment in the US, momentum in new launches and roadmap for turnaround of recently acquired Cenexi CMO in EU indicate that the worst is likely over, analysts said.
“We raise our earnings estimates by 8.5%/5% for FY24/FY25 factoring in: a) faster revival of the lost business by adding new customers, b) price stability in the base portfolio, and c) increase in milestone income. We value Gland at 23x 12M forward earnings to arrive at our TP of Rs 1,560,” Jefferies said.Noting Gland’s sequential recovery in the base business in Q1, Kotak Equities has upgraded the stock from sell to reduce rating, with a target price of Rs 1,300.
“While concerns about the long-term growth and margin outlook remain, we highlight that unlike its commentary in May 2023, when Gland’s management had limited visibility on client-specific challenges among other issues, the company has now alluded to having greater visibility on the demand front. In addition, higher confidence in the margin trajectory of the base business augurs well,” Kotak said.
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