Strides Arcolab Ltd (SAL) is well-positioned to capitalise on its strong portfolio of specialty products. We believe specialty segment will deliver superior revenue growth over next 2 years. EBITDA margin will be driven by improved product mix and launch of high margin on co products partially offset by increased spend on R&D and legal expenses to support its FTF portfolio and higher SG&A spend to support its front-end Brazilian business.Net margin will benefit from low interest cost on account of debt repayments over the year.
Q4 performance continues to beat our expectations. Company posted revenue of Rs 687 cr (51% y-o-y) driven primarily by both specialty as well as pharmaceutical segment. Adj. EBITDA stood at Rs 139.9 cr(60.8% y-o-y). Company has reported PAT of Rs 68.4 cr and adjusted PAT of Rs 41.2 cr (652.4% y-o-y).
Specialty Segment:
Revenues from Specialty segment in 4Q CY11 stood Rs. 273 cr (23.8% YoY) with an EBITDA margin of 27.7% (17.3% in 4Q CY10); mainly driven by higher product launches in this quarter.
Company has filed 29 new ANDA and received 25 approvals in CY11 from US FDA. Management plans to commercialise 25 ANDA (approved but not yet launched) in CY12.
Pharmaceutical Segment:
Revenues from this segment increased by63.7% y-o-y to Rs. 408 cr in 4Q CY11 whereas EBITDA margin contracted to 10.6% (21.7% in 4Q CY10).
Pharmaceutical business has primarily benefited from strong sales from its Australasia business coupled with licensing income and high growth from its Global Disease Initiative business. EBITDA margin was impacted primarily on account of sales mix and higher operating charges.
Maintain Buy: We are introducing CY13 estimates in our projections. Based on our CY 13E EBITDA expectation of Rs 606 cr and assigning a multiple of 7x, we arrive at arevised target price of Rs 669(Previous target price was Rs 470) indicating 22% upside.
Q4 performance continues to beat our expectations. Company posted revenue of Rs 687 cr (51% y-o-y) driven primarily by both specialty as well as pharmaceutical segment. Adj. EBITDA stood at Rs 139.9 cr(60.8% y-o-y). Company has reported PAT of Rs 68.4 cr and adjusted PAT of Rs 41.2 cr (652.4% y-o-y).
Specialty Segment:
Revenues from Specialty segment in 4Q CY11 stood Rs. 273 cr (23.8% YoY) with an EBITDA margin of 27.7% (17.3% in 4Q CY10); mainly driven by higher product launches in this quarter.
Company has filed 29 new ANDA and received 25 approvals in CY11 from US FDA. Management plans to commercialise 25 ANDA (approved but not yet launched) in CY12.
Pharmaceutical Segment:
Revenues from this segment increased by63.7% y-o-y to Rs. 408 cr in 4Q CY11 whereas EBITDA margin contracted to 10.6% (21.7% in 4Q CY10).
Pharmaceutical business has primarily benefited from strong sales from its Australasia business coupled with licensing income and high growth from its Global Disease Initiative business. EBITDA margin was impacted primarily on account of sales mix and higher operating charges.
Maintain Buy: We are introducing CY13 estimates in our projections. Based on our CY 13E EBITDA expectation of Rs 606 cr and assigning a multiple of 7x, we arrive at arevised target price of Rs 669(Previous target price was Rs 470) indicating 22% upside.
