MOSL: STRIDES SHASUN (Buy)-Gradual sequential improvement in operating performance
​Strides Shasun: Gradual sequential improvement in operating performance
(STR IN, Mkt Cap USD1.2b, CMP INR827, TP INR1201, 45% Upside, Buy)
- Strides Shasun's (STR) 2QFY18 sales of INR10b were better than our estimate of INR8.9b. EBITDA margin of 13.2% missed our estimate of 14.5%. Adjusted PAT of INR253m too was lower than our estimate of INR439m.
- Regulated market and branded generics drive sales growth: Sales grew 4.4% YoY (+18.2% QoQ) to INR10b for the quarter. With a trough formed in 1QFY18, there has been increased business from the regulated market, and also from branded generics in the emerging market. Weak institutional business in the emerging market affected overall growth for the quarter.
- Sequential improvement in financial performance: Gross margin improved 120bp QoQ to 51.4% due to a superior product mix. In addition, higher operating leverage led to a sequential 280bp improvement in EBITDA margin. Accordingly, adjusted PAT improved from INR69m in 1QFY18 to INR253m in 2QFY18. EBITDA margin remained lower on a YoY basis. Lower other income and a higher tax rate led to a further YoY fall in PAT for 2QFY18.
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.
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