MOSL: STRIDES PHARMA (Buy)-Reset strategy + product-specific opportunity drive earnings
Strides Pharma: Reset strategy + product-specific opportunity drive earnings
(STR IN, Mkt Cap USD0.6b, CMP INR469, TP INR550, 17% Upside, Buy)
US on robust growth path; new levers of growth – WIP
- Strides Pharma (STR) was able to scale up the US business from USD20m in 4QFY18 to USD66m for 3QFY20, led by superior execution, favorable seasonality and lower than permissible level of impurity in Ranitidine. Further, the company appears set to build biopharma and injectables as new levers of growth over the next 3-4 years.
- We expect ramp-ups to progress well on the back of new launches and increased traction in existing products.
- We raise our EPS estimate by 21%/12.6%/8.4% for FY20/21/22 to factor in strong traction in US generics and other regulated markets. Re-iterate Buy.
Superior product mix drives margins
- Revenue increased 28.5% YoY to INR7.3b (our estimate: INR7.6b) in 3QFY20, led by US business (+62% YoY/16% QoQ to INR4.6b or USD66m) and other regulated markets business (+54% YoY to INR2.2b).
- However, emerging market sales declined 62% YoY to INR566m.
- Gross margin (GM) expanded 1,360bp YoY/620bp QoQ to 58.2%, led by a better product mix and partly on a low base of 3QFY19.
- Accordingly, EBITDA margin improved 420bp QoQ/1,200bp YoY to 24.7% (our estimate: 20.2%).
- EBITDA was up 150.6% YoY at INR1.8b (our estimate: INR1.5b).
- Adj. PAT grew at a higher rate of ~330% (INR794m v/s our est. of INR564m) on improved margin and a low tax rate (6.4% v/s 20.8% in 3QFY19).
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.