Gland Pharma plunges 13%, hits 52-week low on disappointing Q2 results

Shares of Gland Pharma hit a 52-week low of Rs 1,942.90 as they plunged 13 per cent on the BSE in Thursday’s intra-day trade after the company reported a 20.14 per cent year-on-year (YoY) decline in its consolidated net profit at Rs 241 crore for the second quarter ended September 30 (Q2FY23), owing to lower sales and higher expenses. The company had posted a consolidated net profit of Rs 302 crore in the same period last fiscal (Q2FY22).

The stock of Gland Pharma fell below its previous low of Rs 2,032.25, touched on October 10, 2022. The stock's record low stands at of Rs 1,701 registered on November 20, 2020. At 09:38 AM; the stock traded 12 per cent lower at Rs 1,967, as compared to 0.62 per cent gain in the S&P BSE Sensex.

Gland’s earnings before interest, taxes, depreciation, and amortization (EBITDA) margin contracted 150 bps to 33 per cent from 38 per cent in a year ago quarter.

The consolidated revenue from operations during the period under review stood at Rs 1,044 crore, as against Rs 1,080 crore in the year-ago period. The company said its revenue from its core markets of the US, Europe, Canada and Australia grew by 3 per cent to Rs 747 crore in Q2FY23, as against Rs 722 crore in Q2FY22.

However, India revenue was down 42 per cent YoY at Rs 72.6 crore, while the same for the 'rest of the world' market was also down 3 per cent YoY at Rs 224 crore.

Although the company has seen increased competition in its new products, the management of the company said it remains confident of launch pipeline that will ensure sustainable growth. The management is seeing positive momentum in Biologics/Biosimilar CDMO business.

Gland Pharma’s Q2FY23 operational performance was in line with expectation. While sales in ROW/India markets revived in Q2FY23, profitability is yet to show improvement as supply constraints of certain materials are still to be completely resolved, and there is ongoing opex related to the biologics segment, which is yet to garner revenue, Motilal Oswal Financial Services said in result update.

However, the brokerage firm cut its EPS estimates by 7 per cent/6 per cent for FY23/FY24, respectively, and reduced P/E multiple to 31x from 33x factoring in a delay in addressing product-specific issues, thereby moderating medium-term growth outlook, gradual recovery in India business and higher competition, and increased opex towards biologics, hormonal/suspension products.

Gland has exhibited business recovery to some extent in Q2FY23 v/s Q1. Further, it continues to put effort towards complex product pipeline buildup and enhance manufacturing capability and capacity, it added.

Technical View

Bias: Negative

Support: Rs 1,864

Resistance: Rs 1,935; Rs 1,981

After a mild recovery in recent times, the stock broke down sharply on the daily chart today. The stock has dipped below the 20-DMA, placed at Rs 2,122, and also below the lower-end of the Bollinger Band on the daily chart.

The near-term bias is likely to remain bearish as long as the stock trades below Rs 1,981. The stock is also currently trading below the lower-end of the Bollinger Band on the weekly chart, which stands at Rs 1,935.

On the downside, the stock may seek support around Rs 1,864 - which is the lower-end of the Bollinger Band on the monthly chart.

Among the key momentum oscillators, the DI (Directional Index), MACD, and the Stochastic Slow, too, are in favour of the bears.

(With inputs from Rex Cano)