MOSL: STRIDES PHARMA (Buy)-Healthy traction in regulated markets, operating leverage improving
STRIDES PHARMA: Healthy traction in regulated markets, operating leverage improving
(STR IN, Mkt Cap USD0.5b, CMP INR373, TP INR440, 18% Upside, Buy)
- Regulated markets drive business growth/margins: Strides Pharma's (STR) revenue was up 38% YoY to INR7.1b (in-line) for 2QFY20. Sales growth was primarily driven by the US business (+81% YoY to INR4b; USD57m) and other regulated markets (OTM; +60% YoY to INR2.2b). This, however, was partly offset by lower EM sales (-41% YoY to INR980m), with institutional/Africa business sales declining by 44%/35% YoY to INR595m/INR385m.
- Gross margin expanded 800bp YoY to 58%, led by a higher share of front-end business in the US. EBITDA margin too improved by 1,120bp YoY to 20.5% (our estimate: 18.5%) due to a better product mix and operating leverage (employee/other expenses down 220bp/80bp YoY). EBITDA increased ~3x YoY to INR1.5b (our estimate: INR1.3b). STR reversed gross obligation liability accrued at the time of acquisition of Universal Corp, resulting in an exceptional gain of INR1b. It incurred a forex loss of INR118m for the quarter. Adjusting for the same, PAT came in at INR524m (our estimate: INR433m), as against a loss of INR64m in 2QFY19.
- For 1HFY20, sales/EBITDA/PAT came in at INR14b/INR2.7b/INR865m off a low base.
- Concall highlights: (a) STR has submitted all data required by the USFDA regarding Ranitidine. (b) The company is on track in terms of approval of one CGT product in 4QFY20. (c) Excluding Ranitidine, STR guided for US revenue of USD220-240m for FY20. (d) Singapore plant under-recovery is ~INR150m per quarter. STR expects to achieve breakeven for this plant before FY20.
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.
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.
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.