MOSL: STRIDES SHASUN (Buy)-Maintain positive stance despite muted 1QFY18
​Strides Shasun: Maintain positive stance despite muted 1QFY18
(STR IN, Mkt Cap USD1.2b, CMP INR876, TP INR1300, 48% Upside, Buy)
- Sales increased 10% YoY to INR8.4b in 1QFY18, led by higher regulated market formulation and API sales. EBITDA margin shrunk sharply from 16.8% in 1QFY17 to 10.4% in 1QFY18 due to pricing pressure in some products in the US and an inferior product mix in anti-malaria. PAT thus declined to INR58m from INR334m in the year-ago period.
- Moderate revenue growth for the quarter…Regulated market sales (50% of total) rose 12% YoY, led by a niche portfolio in the US, increased product offering and enhanced reach in Australia. However, growth was partly offset by pricing pressure in legacy products in the US market. Emerging market sales (32% of total) rose 7% YoY, led by Africa branded and institutional ARVs. API sales (18% of total) were steady, with an increase of 11% YoY.
- …but segment-specific levers on track: STR has filed five ANDAs YTD and 29 are pending for approval. It maintained the guidance of 15-20 filings in FY18. In Australia, STR is on track to increase distribution and also outsourcing from India. Partners of STR are expected to receive approval for Sevelamer in the near term, driving API sales. Based on this, STR remains confident of at least 20% YoY revenue growth in FY18, subject to product approvals.
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.
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