MOSL: STRIDES SHASUN (Buy)-At trough now, op. performance to pick up going forward
Strides Shasun: At trough now, op. performance to pick up going forward
(STR IN, Mkt Cap USD0.5b, CMP INR415, TP INR481, 16% Upside, Buy)
- Regulated markets drive sales for the quarter: STR’s revenue was stable YoY at INR6.6b (our estimate of INR6.3b). Growth was led by Australia (+18% YoY to INR2.3b) and the US (+13% YoY to INR1.7b) businesses, offset by de-growth in Institutional (-29% YoY) and Africa (-35% YoY) businesses. Gross margin expanded 200bp YoY to 48.7% on account of a better product mix and a favorable currency impact. Other operating expense rose 60bp YoY, restricting EBITDA margin expansion to 140bp YoY (to 12.2%). Though EBITDA was up 13% YoY, STR reported a loss of INR43m (our estimate of a profit of INR157m), largely due to lower other income, higher depreciation and a loss in JV/associates.
- Other key highlights: (a) STR on track to bring 50% of the partnered business in the US to own front-end by FY19. (b) 27 ANDAs pending approval at end-1QFY19. (c) Due diligence in progress for the merger of Arrow and Australia business of Apotex. The transaction is under review by Australia Competition and Consumer Commission (ACCC). (d) Growth in Institutional business to be driven by next-gen combination drugs. The primary and secondary sales gap in the branded generic business in Africa likely to normalize 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.
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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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