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Fundamental Analysis of Glenmark Life Sciences – Future Plans & More

Fundamental Analysis of Glenmark Life Sciences – Future Plans & More

Fundamental Wringer of Glenmark Life Sciences - Cover Image

Fundamental Wringer of Glenmark Life Sciences: For some time now, Glenmark Life Sciences, a listed subsidiary of Glenmark Pharmaceuticals has been in the news. Allegedly, Gujarat-based Nirma Group, KKR, Blackstone, and other giants want to buy this recently listed pharma stock.

But why so? What’s so interesting well-nigh it? Should retail investors consider it? We’ll struggle to wordplay these and other questions by performing a fundamental wringer of Glenmark Life Sciences in this article.

Fundamental Wringer of Glenmark Life Sciences

We’ll uncork our study by reading well-nigh the history and merchantry of the company. In the process, we’ll moreover read well-nigh its scale of operations and merchantry segments. Next, we’ll equip ourselves with the global API industry landscape.

After that, we’ll race through the financials of the stock. A highlight of the R&D spending, future plans and a summary conclude the vendible at the end. So without remoter ado, let us jump in.

Company Overview

Glenmark Life Sciences (GLS) Ltd. traces its origins to 2001 when its parent visitor Glenmark Pharmaceuticals Ltd. (GPL) set up its zippy pharmaceutical ingredient (API) business. Since then the segment grew exponentially until it was hived off in 2019 and listed separately as Glenmark Life Sciences in 2021.

GLS is engaged in the development, manufacturing and supply of high-value, non-commoditised APIs. APIs are the biologically zippy component in a drug product which create the desired effect.

The visitor caters to chronic therapeutic segments like Cardiovascular (CVS) disease, Central Nervous System (CNS) disorders, pain management and anti-infectives.

The API player supplies its products to increasingly than 700 customers wideness 65 countries globally including 16 of the world’s biggest pharma players. It has a portfolio of 137 API products with 26 increasingly products in the pipeline.

As for the scale of operations, GLS has 4 production facilities in Gujarat and Maharashtra with an yearly production topics of 750 MT. Additionally, it has a strong research and minutiae team of 300 employees.

We got a good understanding of the business. Let us squint at its revenue segments in the next section.

Business Segments of Glenmark Life Sciences

As for the merchantry segments, the visitor earned a majority of 88.3% of its total revenue from its API merchantry in FY23. The contract minutiae & manufacturing semester unsalaried 6.5% of the income.

Similarly, the regulated geographies such as the US, Canada, and others rumored for 78% of the total income for the visitor while the wastefulness 22% came from the emerging markets.

The image unelevated throws light on the merchantry segments of the visitor and their revenue contribution in FY23.

Fundamental Wringer of Glenmark Life Sciences - Merchantry Segments
Source: Glenmark Life Sciences Ltd. Q4FY23 Results

We read well-nigh the API manufacturer in-depth above. Let us now move forward to equip ourselves with the global API industry landscape.

Industry Overview

The worldwide API market was valued at $ 181.3 billion in 2020. The sector is projected to expand at a CAGR of 6.2% to reach $259.3 billion by 2026. The overall sentiment is positive on worth of higher spending by pharmaceutical and biotechnology businesses towards the formulation of novel drugs.

A variety of factors including a focus on the minutiae of innovative therapeutic medicines, higher occurrence of chronic diseases, rising demand for customised drugs, and resurgence in drug wordage mechanisms are expected to bring forward this growth.

As for the global industry segments, APIs for oncology tenancy the largest share followed by CVS. However, Glenmark Life Sciences’ merchantry is increasingly tilted towards CVS and diabetes with the two segments written for 34.5% and 15.6% of the earnings.

Industry Overview
Source: Glenmark Life Sciences FY22 Yearly Report

Talking well-nigh the domestic industry landscape, the low-cost structure and at-par technological capabilities put Indian API manufacturers in a sweet spot. This can be gauged from the fact that the nation finance for the most number of DMFs unromantic in the United States at 15%.

Furthermore, India has the most USFDA-approved API sites. This gives the country a ‘first-mover’ advantage. To uplift the nation’s foothold, the Central government has spoken a huge PLI scheme of Rs 6,940 crore which will reward drug manufacturers as per their sales performance judged from the wiring year of FY20.

Glenmark Life Sciences – Financials

Revenue and Net Profit Growth

The API manufacturer Glenmark Life Sciences reported a net profit of Rs 467 crore on revenues of Rs 2,161 crore during the financial year 2022-23. Over the past five years, its topline and sawed-off line grew at an impressive CAGR of 11.4% and 12.4% respectively.

The figures unelevated highlight the revenue and net profit growth of Glenmark Life Sciences over the past five financial years.

Fiscal Year Revenue Net Profit
2023 2,161 467
2022 2,123 419
2021 1,885 316
2020 1,537 313
2019 1,405 293
5-Yr CAGR 11.37% 12.36%

(figures in Rs Cr except for CAGR)

We learnt whilom that GLS has unceasingly increased its earnings in the past. Let us know how the margins fared during this period in the next section of our fundamental wringer of Glenmark Life Sciences.

Profit Margins

Glenmark supplies its products to highly regulated geographies including the US, Canada, Japan, and Europe. This provides it with stability and revenue visibility. Therefore, it has been worldly-wise to maintain profit margins over the study period.

The visitor reported a strong EBITDA margin and net profit margin of 31% and 21.6% for the recent fiscal year.

The figures in the table unelevated highlight consistency in the EBITDA margin and net profit margin of Glenmark Life Sciences for the previous five fiscals.

Fiscal Year EBITDA Margin Net Profit Margin
2023 31.0 21.6
2022 29.7 19.7
2021 21.4 18.6
2020 31.5 20.4
2019 30.6 20.8

(figures in %)

Debt Analysis

We shall alimony the debt wringer of the pharma stock as it is a debt-free stock with a nil debt-to-equity ratio. Furthermore, it is not just the recent financial year, Glenmark Life Sciences has remained debt self-ruling for a considerable number of years.

Return on Probity / Net Worth (RoE / RoNW)

So far we have learnt well-nigh the business, industry and earnings of the visitor for our fundamental wringer of Glenmark Life Sciences. Let us now move forward to analyse the profitability of the stock.

We’ll squint at the return on probity / net worth (RoE / RoNW) and not the return on wanted employed (RoCE) as the visitor is debt free.

Glenmark’s stock generated an RoE / RoNW of 22.3% in FY23. A unstudied observer may say that the icon has come lanugo in the recent fiscals. However, a deeper study reveals that it is considering of the IPO fundraising in recent years and the demerger older (the start of our study period).

The table unelevated showcases the return on probity / net worth of Glenmark Life Sciences for the last five fiscal years.

Fiscal Year RoE / RoNW
2023 22.3
2022 29.8
2021 60.9
2020 77.9
2019 99.3

(figures in %)

Research and Minutiae (R&D) Spend

Research and minutiae (R&D) spending is a key metric to track for any pharmaceutical company. It highlights whether the visitor is spending unbearable towards developing newer products to maintain its leadership in the coming years.

Glenmark’s R&D spend at 3% of the total sales in FY23 was the highest during our study period. The image unelevated shows the R&D spending of Glenmark Life Sciences over the last five years.

Fundamental Wringer of Glenmark Life Sciences - R&D Spend
Source: Glenmark Life Sciences Ltd Q4FY23 Investor Presentation