Sunday, 22 November 2020

Top domestic brokerages seem to be bullish

Top domestic brokerages seem to be bullish on the
initial public offering of Gland Pharma which
hit the market on Monday with its Rs 6480 crore offering

Analysts are upbeat on Gland Pharma Ltd as it has one of the strongest pipelines in high entry barrier injectables segment. Its 267 ANDA filings comprise 191 ANDA filings for sterile injectables, 50 for oncology and 26 for ophthalmic related products.

Interestingly, on the compliance front, the Hyderabad-based company had never received warning letters from USFDA since inception.

ICICI Securities has given a subscribe recommendation to the stock at Rs 1500 per equity share, the stock is available at 31.7x FY20.

“With benefits of being an out and out integrated injectable/ophthal manufacturer and B2B functionary combined, Gland offers a compelling proposition with its unblemished regulatory track record and customer stickiness besides long-standing manufacturing pedigree, justifying premium valuation. We have a SUBSCRIBE recommendation on the stock,” ICICI Securities said in its report.

In fact, between FY18-20, Gland Pharma’s revenues have grown at CAGR of 28% while Q1FY21’s revenue grew by 31%.  Due to no debt and high cash, the company has strong PAT margins at 29.4% in FY20 which has improved from 19.8% in FY18.

 According to Nirmal Bang Securities, the company is able to maintain CAGR of 25% for medium term with strong profitability. Though, Q1FY21 margins looks on the higher side, we believe EBITDA margins in the range of 35-38% are sustainable.

 It also said in its report that the company intends to do capex with the IPO and cash on books, which can temporarily affect the return ratio in near term however the long-term trajectory remains positive

 “The issue price commands P/E of 31.7x FY20 and 19.5x Q1FY21 annualized earnings at the upper price of band of Rs 1490-1500, which is at upper end of Industry. However, going forward the higher revenue growth, improving profitability would make it a better choice among peers. We recommend “Subscribe” on the issue for long term gains,” Nirmal Bang Securities said in its report.

 Analysts are bullish that the company is also expanding its footprints in new geographies and investing large amount in manufacturing capabilities as well as R&D to keep order pipeline healthy. Further, the company has strong support from parent and as well injectables segment has high entry barriers which augur well for the company’s growth.

 “On valuation front, Gland Pharma is valued at a P/E of 18.5x FY21E annualized EPS. Going forward, we remain positive on the company’s growth and so investors so investors having long term view can subscribe to the issue,” said Religare Securities in an investor note.

The price band for the offer has been fixed at Rs 1,490-1,500 per share, and the issue will close on November 11.

The IPO comprises a fresh issue aggregating up to Rs 1,250 crore and an offer for sale of up to 3.49 crore shares.

Ahead of the opening of the IPO, Gland Pharma on Saturday said it has raised a total of Rs 1,943.86 crore from 70 anchor investors. The company has raised funds at the upper price band of Rs 1,500 per share by allotting 12,959,089 shares to investors.

The IPO comprises a fresh issue aggregating up to Rs 1,250 crore and an offer for sale of up to 3.49 crore shares.

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