Gland Pharma delivered revenue/EBITDA/PAT growth of 40%/37%/34% in 4QFY21, largely in line with our estimates with RoW driving strong revenue growth. We expect the company to leverage its broad product portfolio to expand in other geographies while the addition of biologics capabilities will further enhance addressable market opportunity. At 30X FY2023E EPS, positives are largely priced in. ‘Reduce’.
Strong end to FY2021: Gland Pharma posted revenue growth of 40% yoy in 4QFY21, largely in line with our estimates. The US grew 26% yoy (in line vs KIE) led by ramp-up in micafungin, daptomycin and dexmedetomidine supplies. RoW performance remained robust, growing 2X yoy, 9% ahead of our estimates driven by geographical expansion while India growth at 15% yoy was lower versus expectations. Gross margin declined 390 bps yoy and was well below our expectations on account of geographical mix (higher RoW). Employee expenses grew 16% yoy while other expenses remained under control. EBITDA margins declined 80 bps yoy (-150 bps vs KIE) to 36.9% led by lower gross margins with EBITDA 4% below estimates. Higher other income and lower depreciation offset EBITDA miss, driving an in-line PAT. Gland generated Rs6 bn of OCF in FY2021 of which Rs2.2 bn was utilized for capex with net cash position of Rs30 bn (Mar 2021).
Strong near-term growth visibility, addition of biologics capabilities enhance long-term outlook: Gland Pharma ended FY2021 on a strong note with new launches and expansion into other geographies driving robust revenue growth. A strong pipeline of products (50 pending ANDAs), healthy filing rate (21 ANDA filings in 9MFY21), entry into new markets (including China), potential for increasing market share in recently launched products along with higher traction in Covid-related products provide solid medium-term growth visibility.
Medium-term growth priced in: We increase our FY2022-23E EPS estimates by 3-4% each to factor in higher supplies of Covid-related drugs and increasing market share in certain key products. Revise fair value to Rs 2,550 based on 28X FY2023E EPS with higher multiple factoring in an increase in addressable market opportunity through vaccines and biologics CMO.