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http://content.icicidirect.com/mailimages/ICICIdirect_StridesArcolab_Q4CY11.pdf
A s c e n t g o n e ; a l l e y e s o n s p e c i a l i t i e s …
Strides Arcolab’s Q4CY11 results were far above our expectations. The
revenues increased by 50% YoY to | 698 crore, far above our expectation
of | 599 crore on account of higher than expected licensing income. The
licensing income during the quarter was | 170 crore as against our
expectation of | 50 crore and | 97 crore in the corresponding previous
period. Excluding licensing income, the base business witnessed robust
growth of 43% YoY, still slightly below our estimates on the back of
structural changes initiated in Brazil. Despite higher licensing income,
EBITDA margins declined 310 bps YoY to 15.6% (as against our
expectation of 20.5%) on the back of translation forex losses (| 10 crore)
and one-time losses at the Brazilian subsidiary (| 30 crore). Thanks to
forex gain of | 58.2 crore on the back of revaluation of some of the
investments in the Ascent account the net profit grew to | 68.4 crore. We
have upgraded our rating on the stock from HOLD to BUY.
ƒ Plans to launch 25 products in US market in CY12
In the US, the company has launched only 33 products till date
despite 62 product approvals on the back of a delay in site transfers.
The company expects to launch additional 25 products in CY12.
Recently, it received USFDA approval for its Penem facility in Brazil.
It is planning to launch two Penems in both the US and EU market in
the current fiscal.
ƒ Balance sheet streamlining on the cards
Strides received cash of around US$275 million via the Ascent sale
in January 2012. It has already paid US$50 million of debt and will
repay FCCB debt of US$117 million in June 2012. With this cash
inflow, we expect the debt to equity to improve from 1.67x as on
December 31, 2011 to 0.8x by the end of 2012.
V a l u a t i o n
Strides is currently trading at ~10x CY13E EPS of | 53.7. With the Ascent
exit, we expect a further improvement in margins and much lighter
balance sheet besides strong traction from specialities on account of
strong filing momentum and facility approvals. We have valued the stock
at | 590 based on 11x CY13E EPS of | 53.7. We upgrade the stock to BUY
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
http://content.icicidirect.com/mailimages/ICICIdirect_StridesArcolab_Q4CY11.pdf
A s c e n t g o n e ; a l l e y e s o n s p e c i a l i t i e s …
Strides Arcolab’s Q4CY11 results were far above our expectations. The
revenues increased by 50% YoY to | 698 crore, far above our expectation
of | 599 crore on account of higher than expected licensing income. The
licensing income during the quarter was | 170 crore as against our
expectation of | 50 crore and | 97 crore in the corresponding previous
period. Excluding licensing income, the base business witnessed robust
growth of 43% YoY, still slightly below our estimates on the back of
structural changes initiated in Brazil. Despite higher licensing income,
EBITDA margins declined 310 bps YoY to 15.6% (as against our
expectation of 20.5%) on the back of translation forex losses (| 10 crore)
and one-time losses at the Brazilian subsidiary (| 30 crore). Thanks to
forex gain of | 58.2 crore on the back of revaluation of some of the
investments in the Ascent account the net profit grew to | 68.4 crore. We
have upgraded our rating on the stock from HOLD to BUY.
ƒ Plans to launch 25 products in US market in CY12
In the US, the company has launched only 33 products till date
despite 62 product approvals on the back of a delay in site transfers.
The company expects to launch additional 25 products in CY12.
Recently, it received USFDA approval for its Penem facility in Brazil.
It is planning to launch two Penems in both the US and EU market in
the current fiscal.
ƒ Balance sheet streamlining on the cards
Strides received cash of around US$275 million via the Ascent sale
in January 2012. It has already paid US$50 million of debt and will
repay FCCB debt of US$117 million in June 2012. With this cash
inflow, we expect the debt to equity to improve from 1.67x as on
December 31, 2011 to 0.8x by the end of 2012.
V a l u a t i o n
Strides is currently trading at ~10x CY13E EPS of | 53.7. With the Ascent
exit, we expect a further improvement in margins and much lighter
balance sheet besides strong traction from specialities on account of
strong filing momentum and facility approvals. We have valued the stock
at | 590 based on 11x CY13E EPS of | 53.7. We upgrade the stock to BUY
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