Investment Memo: GLS

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Our Rating: HOLD

Mehabe score: 3
G Factor: 4
Piotski Score: 7
The stock has a rating HOLD. The mehabe team score is reflective of its fundamental and technical merits. A rating above 8 is considered good buy. The stock has a G-Factor of 4 and Piotski score of 7.

Description

Glenmark Life Sciences, a subsidiary of Glenmark Pharmaceuticals Ltd, is one of the leading developers and manufacturers of select high-value Active Pharmaceutical Ingredients. The company further operates in Contract Development and manufacturing operations to offer services to specialty Pharmaceutical companies.[1]
Site: GLS
Main Symbol: GLS

Price Chart

Technical Analysis

• Stock trades at 489.0, below its 50dma 501.71 and below its 200dma 595.35. The stock remains bearish on technicals
• The 52 week high is at 799.95 and the 52week low is at 376.00

Price Chart

P/E Chart

Sales and Margin

Strengths

– is almost debt free.
– has a good return on equity (ROE) track record: 3 Years ROE 68.88%

Weakness

– Stock is trading at 7.96 times its book value

Competition

– The industry trades at a mean P/E of 27.5x. Biocon trades at the industry’s max P/E of 60.35x. GLS trades at a P/E of 14.3x
– Industry’s mean G-Factor is 2.1 while the mean Piotski score is 9.0. GLS has a G-Factor of 4 and Piotski scoreof 7.
– Average 1 month return for industry is 2.3%. The max 1- month return was given by Dr Reddy’s Labs: a return of 7.2 %

Quarterly Results

• Sales for period ended Mar 2022 is Rs 514.0 cr compared to Rs 467.0 cr for period ended Mar 2021, a rise of 10.1% .

vis-vis 170.0 for period ended Mar 2021 .

• Operating Margins contracted -877.6 bps for period ended Mar 2022 vis-vis Mar 2021.
• Company reported operating profit of Rs 142.0 cr for period ended Mar 2022 and operating profit margin at 27.6 % for same period.
• The EPS for quarter ended Mar 2022 is Rs 8.07 compared to Rs 8.46 for previous quarter ended Dec 2021 and Rs 106.81 for Mar 2021.

Profit & Loss Statement

Profit&Loss Comments

• Company reported sales of Rs 2123.0 cr for period ended Mar 2022 vis-vis sales of Rs 1885.0 cr for the period ended Mar 2021, a healthy growth of 11.2%. The 3 year sales cagr stood at 33.8%.
• Operating margins shrank to 29.0% for period ended Mar 2022 vis-vis 31.0% for period ended Mar 2021, contraction of 200.0 bps.
• Net Profit reported at Rs 419.0 cr for period ended Mar 2022 vis-vis sales of Rs 352.0 cr for the period ended Mar 2021, rising 16.0%.
• Company recorded a healthy Net Profit CAGR of 28.8% over the last 3 years

Balance Sheet Statement

Cash Flow Statement

Cash Flow comments

Sales Growth

Profit Growth Statement

Profit Growth Statement

Stock Price CAGR

Return of Equity

General Comments

– The company has worsened on its Return on Equity (RoE) metric. The RoE on Last Year basis was 56.0% compared to 69.0% over the last 3 Years.
– The stock has given a return of % on a 1 Year basis vis-vis a return of % over the last 3 Years.
– The compounded sales growth on a TTM bassis is 13% vis-vis a compounded sales growth of 34% over the last 3 Years.
– The compounded profit growth on a TTM basis is 19% vis-vis a compounded profit growth of 29% over the last 3 Years.

Ratios

Shareholding Pattern

– FII shareholding has remained largely constant. The Mar 2022 fii holding stood at 8.12% vis-vis 8.32% for Dec 2021
– Public shareholding has remained largely constant. The Mar 2022 public holding stood at 8.47% vis-vis 8.36% for Dec 2021

Conclusion

– is almost debt free.
– has a good return on equity (ROE) track record: 3 Years ROE 68.88% – Stock is trading at 7.96 times its book value

• The business fundamentals of the stock remain stable. Stronger near term results will build interest in the stock. We suggest to wait for a upturn in business performance.
• Technically, the stock remains below its 50 DMA 501.71 and is trading at 489.0. Shows a near term lack of buying interest.
• Thus, overall we retain a HOLD on the stock.

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