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Strides Arcolab
R o b u s t g r owt h ami d s t d e c l i n e i n l i c e n s i n g…
Strides Arcolab’s Q2CY11 numbers were above our expectation.
Revenues increased by 28% YoY to | 618.5 crore above our expectation
of | 549 crore. Excluding the licensing income, the base business
witnessed robust growth of 55% YoY higher than our expectation. The
licensing income was | 74 crore (our expectation: | 54 crore) vs. | 134
crore in the corresponding quarter. EBITDA margins for the quarter
declined by 350 bps YoY to 23.5% (as against our expectation of 20.5%)
on expected lines due to lower licensing income and consolidation of the
Brazilian JV, which is making losses due to the tender business. Net profit
grew 50% to | 68.9 crore above our expectation of | 48 crore mainly on
account of forex gains. Due to a fall in share price, we have revised our
recommendation to BUY while retaining the target price.
ƒ Plans to launch 19 products in US markets in H2CY11
During the quarter, the company launched six products taking the
total launches in the current half to 16 in the US market. It is
planning to launch 19 more products in the US market in the second
half. The company launched Gemcitabine (generic version of cancer
drug Gemzaar) on July 26, 2011 in the US market through Pfizer.
Total seven players have launched the product in the US market. Of
this, only three players have approvals for all three strengths.
ƒ Pharma business witnesses 51% YoY growth
The pharma business registered robust growth of 51% YoY to | 398
crore on the back of higher institutional business and increase in the
sales of soft gelatine product Ergocalciferol (Thyroid control) in US.
V a l u a t i o n
The performance in the first half of the calendar year is already ahead of
management guidance on a proportionate basis. With approval for new
facilities and likely ramp-up in product approvals, the second half is also
expected to be robust. The only overhang is high leverage and, hence, a
steep valuation discount vis-à-vis peers. We expect a gradual
improvement in leverage and return ratios once the new facilities run on
full steam. We have valued the stock at | 426 based on 9x CY12E EPS of |
47.5 with BUY rating
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Strides Arcolab
R o b u s t g r owt h ami d s t d e c l i n e i n l i c e n s i n g…
Strides Arcolab’s Q2CY11 numbers were above our expectation.
Revenues increased by 28% YoY to | 618.5 crore above our expectation
of | 549 crore. Excluding the licensing income, the base business
witnessed robust growth of 55% YoY higher than our expectation. The
licensing income was | 74 crore (our expectation: | 54 crore) vs. | 134
crore in the corresponding quarter. EBITDA margins for the quarter
declined by 350 bps YoY to 23.5% (as against our expectation of 20.5%)
on expected lines due to lower licensing income and consolidation of the
Brazilian JV, which is making losses due to the tender business. Net profit
grew 50% to | 68.9 crore above our expectation of | 48 crore mainly on
account of forex gains. Due to a fall in share price, we have revised our
recommendation to BUY while retaining the target price.
ƒ Plans to launch 19 products in US markets in H2CY11
During the quarter, the company launched six products taking the
total launches in the current half to 16 in the US market. It is
planning to launch 19 more products in the US market in the second
half. The company launched Gemcitabine (generic version of cancer
drug Gemzaar) on July 26, 2011 in the US market through Pfizer.
Total seven players have launched the product in the US market. Of
this, only three players have approvals for all three strengths.
ƒ Pharma business witnesses 51% YoY growth
The pharma business registered robust growth of 51% YoY to | 398
crore on the back of higher institutional business and increase in the
sales of soft gelatine product Ergocalciferol (Thyroid control) in US.
V a l u a t i o n
The performance in the first half of the calendar year is already ahead of
management guidance on a proportionate basis. With approval for new
facilities and likely ramp-up in product approvals, the second half is also
expected to be robust. The only overhang is high leverage and, hence, a
steep valuation discount vis-à-vis peers. We expect a gradual
improvement in leverage and return ratios once the new facilities run on
full steam. We have valued the stock at | 426 based on 9x CY12E EPS of |
47.5 with BUY rating
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