28 May 2021
4QFY21 Results Update | Sector: Healthcare
Strides Pharma
Estimate change
TP change
Rating change
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Free float (%)
CMP: INR807
TP: INR930 (+15%)
Buy
US/Institutional business drives earnings
STR IN
90
72.4 / 1
1000 / 388
-15/-10/40
769
70.3
Work-in-progress to build a basket of COVID-19 products
Financials & Valuations (INR b)
Y/E MARCH
2021 2022E 2023E
33.2 39.5 43.6
Sales
6.3
7.9
9.0
EBITDA
2.0
3.7
4.5
Adj. PAT
EBIT Margin (%)
12.7 14.6 15.4
22.2 40.9 50.2
Cons. Adj. EPS (INR)
45.8 84.5 22.7
Inferior product mix was more than offset by lower opex in 4QFY21
EPS Gr. (%)
310.5 341.5 379.5
Revenue grew 47% YoY to INR9.1b (est: INR8.5b) in 4QFY21.
BV/Sh. (INR)
Ratios
Emerging market sales more than doubled (107% growth) YoY to INR2.1b
Net D:E
0.3
0.2
0.2
(23% of sales). US sales grew 46% YoY to INR4.3b (47% of sales). Other
7.5 12.5 13.9
RoE (%)
regulated market sales were up 20% YoY at INR2.7b (30% of sales).
8.8 11.0 12.0
RoCE (%)
Payout (%)
24.2 24.2 24.2
Gross margin contracted 100bp YoY to 59.1% due to inferior product mix.
Valuations
However, EBITDA margin expanded 400bp YoY to 17.5% (est: 19.7%) due to
36.3 19.7 16.0
P/E (x)
lower employee cost and other expenses (-310bp/-190bp as a percentage of
14.9 11.8 10.1
EV/EBITDA (x)
sales). EBITDA grew 90% YoY to INR1.6b (est: INR1.7b).
Div. Yield (%)
0.7
1.0
1.2
FCF Yield (%)
2.6
3.0
6.9
Adjusting for the forex loss and exceptional item, PAT stood at INR470m
2.8
2.4
2.1
EV/Sales (x)
(est: INR706m).
STR’s 4QFY21 operational performance was marginally below our estimate.
The robust performance in the US/Institutional segment within emerging
markets was offset by subdued sales in other regulated markets on account
of COVID-19. In addition to commercial manufacturing of the Sputnik
vaccine by Oct’21, STR is building a basket of COVID-related medicines. The
ANDA filing momentum is expected to pick-up in FY22, providing growth
visibility in the US market.
We cut our FY22E/FY23E earnings estimate by 6% each to account for
increased opex associated with logistics and increased price erosion in select
products. We value STR on a 12-month forward SoTP basis – EV/EBITDA of
12x/7x/6x for the Regulated/Emerging Markets/Institutional segment – to
arrive at our TP of INR930/share. Maintain Buy.
Shareholding pattern (%)
As On
Promoter
DII
FII
Others
Mar-21 Dec-20 Mar-20
29.7
29.7
31.3
16.1
16.7
18.9
24.8
25.2
28.8
29.4
28.5
21.1
STR recorded a loss of INR198m in the Biotech and CHC segment in 4QFY21.
Sales/EBITDA/adjusted PAT rose 21%/17%/43% YoY in FY21 at
INR33.2b/INR6.3b/INR2b.
With US sales of USD215m in FY21, STR remains confident of achieving
annual sales of USD400m over the next three years. There could be near-
term hiccups on account of the ongoing pandemic.
Stelis Biopharma (Stelis) has started validation of batches, which should
conclude by Jun’21. It expects to launch the Sputnik V vaccine by Oct’21.
Typically the validation-to-commercial batch scale is 1:10x.
The funds raised at the Stelis level (USD125m) would be utilized for last mile
capex related to the CDMO business, including setting up a 6KL mammalian
block, and ramping up of process development and other technical
capabilities. The usage of funds would be completed in FY22.
STR holds 33% stake in Stelis post completion of the Series C funding.
It witnessed a considerable QoQ increase in opex (INR1.3b) in 4QFY21 due to
rise in freight cost and supply disruption on account of COVID-19.
Highlights from the management commentary
FII Includes depository receipts
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Tushar Manudhane - Research Analyst
(Tushar.Manudhane@MotilalOswal.com)
Bharat Hegde, CFA
(Bharat.Hegde@motilaloswal.com);