11 August 2017
1QFY18 Results Update | Sector: Healthcare
Strides Shasun
Buy
BSE SENSEX
31,214
S&P CNX
9,711
CMP: INR876
TP: INR1,300(+48%)
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Maintain positive stance despite muted 1QFY18
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.
Inspection update:
STR had four USFDA inspections in Q1FY18, of which, three
had zero 483. The Bangalore facility was issued 483 with three observations.
However, there has been product approval post inspection, indicating minimal
regulatory risk over the medium term.
Valuation view:
We remain positive on STR, given its R&D capabilities, vertical
integration, strong compliance culture and diversified presence. We continue
valuing STR on SOTP basis, and maintain
Buy
with TP of INR1,300.
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
Avg Val, INRm
Free float (%)
STR IN
89.4
78.3 / 1.2
1259 / 849
-9/-36/-37
431
68.9
2019E
Financials & Valuations (INR b)
2017 2018E
Y/E Mar
34.8
43.9
Net Sales
6.4
8.3
EBITDA
2.9
4.2
PAT
32.3
47.4
EPS (INR)
108.2
46.9
Gr. (%)
303.3 341.1
BV/Sh (INR)
10.7
14.7
RoE (%)
7.8
9.2
RoCE (%)
27.2
18.5
P/E (x)
2.9
2.6
P/BV (x)
54.5
11.0
6.7
74.8
57.9
401.5
20.2
12.2
11.7
2.2
Estimate change
TP change
Rating change
Quarterly Performance (Consolidated)
Y/E March
Net Sales
YoY Cha nge (%)
Tota l Expendi ture
EBITDA
Ma rgi ns (%)
Depreci a ti on
Interes t
Other Income
PBT before EO expense
Extra -Ord expens e
PBT
Ta x
Ra te (%)
Mi nori ty Interes t & Profi t/Los s of As s o.
Reported PAT from Continuing Ops.
Adj. PAT from Continuing Ops.
YoY Cha nge (%)
Ma rgi ns (%)
1Q
7,895
28.8
6,573
1,323
16.8
424
559
208
547
60
487
88
18.1
65
334
383
260.9
4.9
FY17
2Q
3Q
9,535
9,335
33.3
7.6
7,338
8,101
1,434
1,997
15.0
21.4
468
475
617
538
658
202
1,008
1,185
0
805
1,008
152
15.1
114
741
741
106.9
7.8
380
78
20.6
1
300
940
59.6
10.1
4Q
8,884
-3.9
7,315
1,569
17.7
529
592
731
1,179
17
1,162
175
15.0
-7
994
1,009
471.5
11.4
1Q
8,418
6.6
7,545
873
10.4
511
640
361
82
58
24
-33
-136.9
0
58
194
-25.4
2.3
FY18
2QE
3QE
10,543
12,197
10.6
30.7
8,466
9,648
2,077
2,549
19.7
20.9
525
518
500
440
250
300
1,302
1,891
0
0
1,302
208
16.0
0
1,094
1,094
923.1
10.4
1,891
321
17.0
0
1,570
1,570
2,534.9
12.9
FY17
4QE
12,739
43.4
9,898
2,841
22.3
514
413
406
2,320
0
2,320
380
16.4
0
1,940
1,940
311.5
15.2
34,834
11.6
28,406
6,428
18.5
1,872
2,269
1,686
3,973
1,002
2,971
470
15.8
462
2,039
2,883
136.7
8.3
FY18E
43,898
26.0
35,557
8,340
19.0
2,068
1,993
1,317
5,596
58
5,538
876
15.8
0
4,662
4,711
63.4
10.7
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Tushar Manudhane
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(Rajat.Srivastava@motilaloswal.com); +91 022 30102511