Gland Pharma freezes at 20% upper circuit on strong June quarter show

Shares of Gland Pharma were locked in the 20 per cent upper circuit at Rs 1,612.60 on the BSE in Tuesday’s intra-day trade after the company reported improved financial performance for the June quarter (Q1).

The firm's gross profit margin was up 700 bp year-on-year (YoY) to 63 per cent for Q1 due to lower raw material costs. On a sequential basis, gross profit margin improved by 900 bp from 54 per cent.

The company said gross margins were better due to improved margin from the base business US portfolio and Cenexi’s margin profile.

However, earnings before interest, taxes, depreciation, and amortization (EBITDA) margin contracted 600 bp YoY to 25 per cent, due to inferior operating leverage. This was partly due to addition of low margin Cenexi business. On a quarter-on-quarter (QoQ) basis, EBITDA margin expanded 400 bp from 21 per cent.

The company’s operational revenue grew 41 per cent YoY and 54 per cent quarter-on-quarter (QoQ) to Rs 1,209 crore. Profit after tax was down 15 per cent YoY to Rs 194 crore. However, on QoQ, PAT more-than-doubled from Rs 78.7 crore in March quarter (Q4FY23).

After a lackluster Q4FY23, Gland has exhibited an improvement in business from core markets as well as stability in India/ROW businesses. The overall performance has improved to some extent due to higher profit share component as well for the quarter.

Motilal Oswal Financial Services raised its earnings estimates by 8.5 per cent/5.0 per cent for FY24/FY25 factoring in faster revival of the lost business by adding new customers, price stability in the base portfolio, and increase in milestone income.

"Gland remains on track to not only revive the base business but also to increase its offerings in newer markets like China, build niche pipeline for regulated markets, and enhance scope of synergy from Cenexi acquisition", the brokerage said in a result update. The stock was trading above its target price of Rs 1,560 per share.

At 10:25 am; Gland was trading 19 per cent higher at Rs 1,600.45 as compared to the flat S&P BSE Sensex benchmark. The stock hit a record low of Rs 861.50 on May 22, 2023. It touched a record high of Rs 4,350 on August 12, 2021.