Hyderabad-based Gland Pharma's US revenue has grown 70% in the last nine months but the quarterly profit is still 17% less than what it was at the end of December 2022.
This is because Cenexi, a contract manufacturing company that Gland acquired for more than ₹1,000 crore a little over a year ago, is still making losses while making a significant contribution to the growing revenue.
If you remove the losses from Cenexi, Gland Pharma's profit for the quarter would have grown 21%, according to the company's presentation to the investors.
The management expects the French unit to breakeven (profit after tax) in the next 12 to 15 months. Earnings before interest, tax, depcreciation and amortisation (EBITDA) would turn positive earlier, Chief Executive Officer Srinivas Sadu added.
The stock fell over 2.4% by 11:15 am on February 15, a day after Gland Pharma said that Cenexi may continue to bleed money for a few more quarters.
The stock has more than doubled since close on May 22, 2023 but the street is divided on where the stock is headed hereon.
| Brokerage | Rating | Target price |
| Goldman Sachs | Buy | ₹2,125 |
| Nomura | Neutral | ₹1,570 |
| Kotak Institutional Equities | Sell | ₹1,400 |
The closing price for Gland Pharma on February 14 was ₹1,953.5.
A slowdown in production and employee restructuring led to the fall in profit (a fall of $170 million in EBITDA) from Cenexi.
One of the facilities is operating at full capacity. The company is planning to move the production of some products from one site to another. This needs regulatory approvals and that would take some time, the management said.
The company plans to spend $30 million (of the total capital expense plan of $35 million) to expand capacity at Cenexi while trying to contain costs simultaneously.
Good news for investors is that 62% of the group revenue comes from the US and that part of the business is growing strong. Gland's revenue from India is just 5%, and it has gone down from 9% a year earlier.
You can read more about the earnings here.
First Published: Feb 15, 2024 11:14 AM IST
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