Gland Pharma slips 10%, hits 52-week low on disappointing Q1 results

Q1 profit after tax tumbled 35 per cent YoY and 20 per cent QoQ to Rs 229 crore, due to lower operational income

Shares of Gland Pharma hit a 52-week low of Rs 2,232 as they slipped 10 per cent on the BSE in Thursday's intra-day trade. The company reported 35 per cent year-on-year (YoY) decline in profit after tax (PAT) to Rs 229 crore in June quarter (Q1FY23), due to lower operational income. The pharmaceutical company's PAT stood at Rs 351 crore in Q1FY22. On a sequential basis, PAT was down 20 per cent from Rs 286 crore in Q4FY22.

The stock has fallen below its previous low of Rs 2,421.30, touched on July 14, 2022. In the past three months, it has tanked 31 per cent as compared to 3 per cent decline in the S&P BSE Sensex. With the past three months' correction, the stock has almost halved or has plunged 49 per cent from its all-time high level of Rs 4,350, touched on August 12, 2021. It had hit a record low of Rs 1,701 on November 20, 2020.

The company's revenue from operations declined 26 per cent YoY to Rs 857 crore from Rs 1,154 crore, and 22 per cent QoQ from Rs 1,103 crore. Last year's revenue was higher due to Covid-19 related product sales.

"India market accounts for 6 per cent of Q1FY23 revenue as compared to 16 per cent in Q1FY22. India B2B sales were impacted due to planned shutdown of Insulin line during the quarter and higher sales of Covid-19 drugs like Remdesivir and Enoxaparin Injection during the same quarter of last year," Gland Pharma said.

Earnings before interest, taxes, depreciation and amortization (ebitda) margin contracted 400 bps to 37 per cent from 41 per cent in the year-ago quarter.

The continued supply disruption, cost escalation, and the company's decision to shut down two of its manufacturing lines for productivity improvement have affected the business for the quarter, Gland Pharma said.

Gland Pharma delivered weak Q1FY23 result due to multiple headwinds such as supply constraints of certain ancillary materials, plant modification-led lower production and reduced scope of business for certain products in the Indian market. While syringe-related hurdle is addressed, Gland Pharma is working towards resolving other ancillary materials’ availability.

Motilal Oswal Financial Services has cut its EPS estimates by 14 per cent/16 per cent for FY23/FY24 to factor in prolonged supply chain-related issues, slowdown in India business, and higher opex.

"We value Gland Pharma at 33x 12M forward earnings to arrive at our target price of Rs 3,000. There are operational hurdles over the near term. However, given product pipeline of complex injectables, consistent compliance track record, biologics-led additional growth lever and surplus cash for any inorganic opportunity, we believe Gland Pharma's business model remains intact for better growth prospects over the next three years," the brokerage firm said in a result update.

Technical View

Bias: Negative

Support: Rs 2,170 - Rs 2,045

Resistance: Rs 2320

Gland Pharma has been trading with a negative bias since late March 2022, when the 20-WMA (Weekly Moving Average) dipped below the 50-WMA. Currently, the price-to-moving average action indicates a bearish bias both on the daily and the weekly charts.

Further, the key momentum oscillators on the daily and weekly charts, too, are strongly in favour of the bears, even as the RSI has entered oversold territory.

In the very near term, the bias for the stock is likely to remain negative as long as it trades below the lower-end of the Bollinger Band on the daily charts i.e. below Rs 2,320. 

On the downside, the stock can take support around Rs 2,170 or extend its fall towards Rs 2,045-odd levels, indicates the quarterly Fibonacci chart.

(With inputs from Rex Cano)