Gland Pharma tanks 20%, hits record low on weak Q4 results

Revenue declined 29% YoY due to lower offtake of the key products in developed as well as domestic markets and due to Production line shut down in Pashamylaram Penems facility due to line upgradation.

Shares of Gland Pharma hit a record low of Rs 1,070.80, as they tanked 20 per cent on the BSE in Friday’s intra-day trade after the company reported a weak set of numbers with profit after tax (PAT) down 72 per cent at Rs 78.70 crore in the March quarter (Q4FY23). The pharmaceutical company had posted PAT of Rs 285.90 crore in a year ago quarter.

The stock fell below its previous low of Rs 1,130.40, touched on March 13, 2023. It has corrected 66 per cent from its 52-week high of Rs 3,176.75, touched on May 23, 2022.

Gland Pharma's revenue declined 29 per cent year-on-year (YoY) to Rs 785 crore mainly due to lower offtake of the key products in developed as well as domestic markets and also due to production line shut down in Pashamylaram Penems facility due to line upgradation.

On operational front earnings before interest, taxes, depreciation and amortization (EBITDA) de-grew 52 per cent YoY to Rs 169 crore with margins at 21.5 per cent.

One of the customers of Gland has filed for voluntary proceedings under Chapter 11 of the US bankruptcy code. Accordingly, Gland has recorded a provision of Rs 56.5 crore for credit impaired financial asset in Q4FY23.

In addition to one of the customers filing for bankruptcy, there has been a shift of business by another customer, impacting Gland’s performance adversely for Q4FY23.

Motilal Oswal Financial Services cut its earnings by 36 per cent/22 per cent for FY24E/FY25E factoring in reduction in scope of business from a bankrupt customer, gradual revival in business due to shift of business by another customer to alternate supplier, and reduced share of profit due to higher competition in existing product portfolio.

While the multiple headwinds on revenue and operational cost have hit its FY23 performance, the brokerage firm expects a slow recovery over the next 12-15 month aided by new launches in China/other regulated markets, newer contracts in CDMO segment and inventory rationalization of existing products, it added.

Technical View

Bias: Bearish

Target: Rs 1,030; Rs 975

Resistance: Rs 1,210

The stock price of Gland Pharma has witnessed a severe downtrend since August 2021. The stock is down a whopping 75.5 per cent from levels of Rs 4,350 to the present lows.

On the daily scale, the stock was seen holding its 20-DMA (Daily Moving Average) since late March. However, with today's sharp fall the stock has once again dropped significantly below the same. The 20-DMA stands at Rs 1,349.

The stock is now also trading below the lower-end of the Bollinger Bands on the daily chart, thus indicating a bearish bias to prevail as long as the stock trades below Rs 1,210.

On the downside, the stock could test support at Rs 1,030 and Rs 975, indicates the quarterly Fibonacci chart.

(With inputs from Rex Cano)