Strides Shasun's Q2FY19 results (Outperformer) - Inline operationally; sequential improvement continues
Q2FY19 result highlights
- Cons. revenues came in at Rs7.4bn (+10% qoq), above est of Rs6.8bn led by higher US at $32m vs est of $29m ($26m in Q1). Other regulated markets came at Rs1.65b vs est of Rs1.4bn. Australia stood inline at Rs2.4bn (+4% qoq) and Africa improved at Rs590mn vs est of Rs375mn (Rs397mn in Q1). Institutional business was lower 16% qoq as expected.
- Led by higher revenues EBITDA came in higher at Rs1bn vs est of Rs0.89bn with at 13.6% vs est of 13.2%. EBITDA was aided by better GMs of 51.9% vs 48.7%. SGA costs were higher qoq due to increased freight costs and higher R&D expenses.
- Continuing business PAT was Rs5mn vs our est of Rs82mn impacted by higher minority cost of Rs123mn vs est of Rs50mn. Reported loss post exceptional loss of Rs74mn stood at Rs69mn
- Mgt reiterated guidance of meaningful pick up in US business from H2FY19 onwards. The company has guided atleast 5 new launches in H2FY19 plus TAD for 18 ANDAs over next 12m. This should significantly expand US sales and drive significant operating leverage.
Key positives: Higher US and EM business; improved GMs
Key negatives: Higher SG&A cost
Impact on financials: We have changed our FY19/FY20 EBITDA estimate by -6%/+2% respectively. FY19 / FY20 EPS est are reduced by 49%/16% to account for higher interest costs and minority interest.
Valuations & view
Strides had a tough FY18 (with Q4FY18 being particularly weak) given the unexpected growth issues in US as well as losses in CHC business. As Strides has begun to successfully implement its recalibrated strategy, the business should begin to regain momentum from H2FY19 onwards led by pick-up in the US business. With > 5 new launches in H2FY19 and TAD date for 18 ANDAs over next 12m, US business is at an inflexion point. Given the high depreciation / interest charges, EBITDA growth pickup (on a low base of ~$60m in FY18) can drive accelerated earnings growth from H2FY19 onwards. We remain positive given Strides’ strong position in Australia and growth potential of its US business. Maintain Outperformer with TP of Rs609 (11xEV/EBITDA (FY20E)
Strides Pharma Science Ltd, formerly Strides Shasun Limited, is a vertically integrated global pharmaceutical company. The Company is engaged in the development and manufacturing of active pharmaceutical ingredients (APIs) and formulations, as well as biotech. Its business segments include Pharmaceutical and Biotech businesses. Its geographical segments are Africa, Australasia, North America and Europe, South and Central America, India and Others. The Company focuses on developing complex pharmaceutical products across therapeutic segments. The Company's products include general tablets, hard gelatin capsules, soft gelatin capsules, sachets, dry powders, dry syrups, potent drugs, semi solids, ointments and creams. It is also involved in supplying generics to hospitals approved by the National Health Service (NHS) and over-the-counter (OTC) products through retail outlets. It operates approximately 10 facilities, which are diversified across Asia, Africa and Europe.
IDFC Securities Ltd., a subsidiary of the Infrastructure Development Finance Company (IDFC) wherein the Government of India holds a 20% interest, is India's leading equities broker catering to most of the prominent financial institutions, both foreign and domestic investing in Indian equities. A research team of experienced and dedicated experts ensures the flow of critically investigated stock ideas and portfolio strategies for our clients. Our coverage spans across various growth sectors such as agriculture, automobiles, Consumer Goods, Technology, Healthcare, Infrastructure, Media, Power, Real Estate, Telecom, Capital Goods, Logistics, Cement amongst other sectors. Our clients value us for our strong research-led investment ideas, superior client servicing track record and exceptional execution skills.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.