Strides Shasun Ltd is a fully integrated global pharmaceutical company with business interests in eveloping niche and complex pharmaceutical products. Shasun merger provides vertical integration benefits with better cost synergies and scale to strengthen institutional and US business. Before acquiring Shasun, Strides used to outsource API from third parties. However, consolidation of Shasun would help in de-risking the US product pipeline & also provide backward integration benefits for its regulated and institutional businesses. Moreover, Shasun and Arrow’s acquisitions will diversify company’s revenue mix with US and Africa being the key growth drivers. The company expects to get 7-8 ANDA approvals in FY17E with an addressable market size of USD1bn (including Lovaza). Interestingly, approval for Lovaza (market size at US$700 mn) is expected in FY17E, which will contribute significantly to the overall revenues due to limited competition in this space.
Valuation & View:
We expect Strides revenue and PAT to grow at a CAGR of 26% & 59% respectively over FY16-18E. Further, BITDA margins are expected to improve by 570bps on account of Shasun’s backward integration, key launches in FY17 coupled with incremental growth from recent acquisitions. Hence, we initiate Strides with BUY rating with a TP of Rs. 1,255 at 18x FY18E earnings.
Research Report Strides Shasun Ltd.
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