BackGland Pharma shares tank over 52% in 2022. Is the valuation now 'attractive'?
The sharp correction over the past six months has made valuation attractive, said Motilal Oswal on Gland Pharma
PremiumGeneric injectables maker Gland Pharma Ltd on Tuesday said it will buy French pharmaceutical firm Cenexi for 120 million euros (approximately ₹1,015 crore) as it looks to expand its presence in the European markets.
Gland Pharma entered into a Put agreement to acquire Cenexi group, thereby enhancing its CDMO offerings in the Europe market. The acquisition would also provide the company with the technical know-how in sterile forms, including ophthalmic gel, needleless injectors, and hormones, as per domestic brokerage and research firm Motilal Oswal.
Also, the sharp correction over the past six months has made valuation attractive at 21x/18x FY24/FY25 earnings, respectively, as per the brokerage. Given the gradual improvement in the core business, the brokerage house has reiterated its Buy rating on Gland Pharma shares with a target price of ₹2,470 apiece. The pharma stock is down more than 52% in 2022 (YTD) so far.
The company's management intends to increase the profitability of Cenexi by improving operational efficiency at the Fontenay site, accelerating technology transfers, shifting some of the products to the GLAND site from Cenexi, and adding capacities at its existing Cenexi sites.
“While we raise our EPS estimate by 3% for FY24 to factor in additional business due to acquisition, we note that the acquisition is margin dilutive. Also, the return ratios of Cenexi (post acquisition) for CY22E would be much lower than GLAND’s," the brokerage added.
Considering the need for local presence to gain business in European markets, this acquisition would help GLAND strengthen its business prospects in these markets. Also, given that Cenexi has capabilities in processing substances such as hormones, suspensions, and controlled substances, it would expand the GLAND’s overall offerings to its customers, Motilal added.
On the other hand, a Bloomberg report suggested that Billionaire Guo Guangchang’s Shanghai Fosun Pharmaceutical Group Co. is considering a sale of Indian drugmaker Gland Pharma Ltd. after receiving interest from potential buyers. Fosun Pharma, a listed arm of Chinese conglomerate Fosun International Ltd., has been working with an adviser as it informally gauges interest in its controlling stake in Gland.
The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
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