Motilal Oswal - Shilpa Medicare (SHILPAMED) MOSL: SHILPA MEDICARE (Buy)-One-offs led weak results-Outlook remains promising

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Motilal Oswal

Tushar Manudhane

MOSL: SHILPA MEDICARE (Buy)-One-offs led weak results-Outlook remains promising

Shilpa Medicare: One-offs led weak results; Outlook remains promising

(SLPA IN, Mkt Cap USD0.6b, CMP INR509, TP INR749, 47% Upside, Buy)

Plant specific issue dragged overall sales growth: Shilpa Medicare (SLPA) delivered sales of INR1.9b (our est: INR2.4b), up 1.1% YoY. Lower US sales on account of equipment specific issues dragged overall sales growth for the quarter. In addition, it received lower development income for the quarter as it has started its own filing. Onco-API growth momentum was maintained for the quarter.
Higher raw material (RM) cost in CRAMS business impacted operating margins for the quarter: Hike in RM prices in CRAMS led gross margin to fall by 205bp YoY to 50.8% in Q3FY18. Addition of employees in formulation led higher employee cost (20% of sales against 17% of sales YoY). This resulted in lower EBITDA margin of 14.7% (our est: 22.5%). Subdued operational performance led 6% YoY reduction in PAT to INR164m (our Est: 428m).
US sales stable; yet to see pick-up in growth: SLPA had US formulation sales of ~INR250m in Q3FY18. SLPA continued to gain market share in g-Vidaza. SLPA has filed 33 ANDAs on cumulative basis with only 2 approved till date.

14/02/2018 6 EN

Underlying

Shilpa Medicare

Shilpa Medicare Limited is engaged in the business of manufacturing of bulk drugs or active pharmaceutical ingredient (API) and intermediates, and wind power generation. The Company's segments include Bulk Drug/Intermediates and Energy. It offers 3a 7b Dihydroxy. The Company deals with APIs, Intermediates, Formulations, New Drug Delivery Systems, Peptides/Biotech products and Specialty Chemicals. The Company supplies oncology/non-oncology APIs and intermediates. Its oncology API products include Anastrozole, Axitinib, Azacitidine, Abiraterone Acetate, Bicalutamide, Bortezomib, Busulphan, Cabazitaxel Amorphous, Capecitabine, Carboplatin, Cladribine, Clofarabine, Zoledronic acid, Vismodegib, Pemetrexed DiPotassium Nonahydrate, Cyclophosphamide Monohydrate and Cytarabine. It also offers AntiRetroVirals. Its non-oncology API products include Acebrophylline, Echothiophate, Nifedipine, Perfenidone, PrucaloprideSuccinate, Sildenafil Citrate, Ursodeoxycholic acid and Dimethyl Fumarate.

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INE790G01031 National Stock Exchange of India India

Provider

Motilal Oswal

Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.

Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.

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Analysts

Tushar Manudhane

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MOSL: SHILPA MEDICARE (Buy)-One-offs led weak results-Outlook remains promising

Shilpa Medicare Ltd: 1 director

MOSL: SHILPA MEDICARE (Buy)-Op. leverage yet to kick in-faster approvals/launches crucial for growth

MOSL: SHILPA MEDICARE (Buy)-G-Gleevec to boost profitability- US generics the key growth driver

MOSL : HOME FIRST FINANCE COMPANY: Earnings in-line with sustained improvement in asset quality

MOSL : SHOPPERS STOP: Ticking the right boxes

MOSL : ERIS LIFESCIENCES: Enhanced efforts toward product launch-related activities

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