Why did Gland Pharma shares tank today and is it in the buy zone yet?

Gland Pharma, which holds the distinction of being a rare Chinese-controlled public listed company in India, has had a roller coaster ride on the Indian bourses. The drugmaker went public two years ago, and then saw its share price more than double within a year to hit an all-time high around 14 months back.

It tried to retest the peak in January, after a correction a year ago, but failed to break out. Indeed, it has been sliding ever since. On Thursday, it crashed nearly 14% and was trading at Rs 1,960 apiece.

Although this is still 33% more than its IPO price, it is now trading at the lowest price at which it has traded ever since it went public.

What went wrong

The company, which makes generic injectable-focused pharmaceutical products, came up with poor numbers as part of its second quarter results on Wednesday.

Gland Pharma’s revenue from operations during the quarter increased 22% as compared to first quarter of the current year but declined by 3% as compared to corresponding quarter of the previous year.

Revenue from operations for the six months ended September 30, 2022, declined by 15% as compared to the corresponding period of previous year due to substantial business impact in first quarter of current financial year and higher base due to COVID related products sales last year.

Meanwhile, net profit for the quarter skid by a fifth to Rs 241.2 crore compared to Q2 FY22 and grew by 5% on a sequential basis. EBITDA too declined 15% on-year while rising 5% on a sequential basis.

EBITDA margin at 33% and PAT margin at 22% declined both sequentially and compared to the year-ago period. The company attributed the margin profile to change in geographical and product mix.

This is likely showing up on the rerating of the company in the eyes of the investors. Multiple brokerages have downgraded the price target on the stock as they expect the stock to continue facing near term challenges.