Motilal Oswal Institutional Equities has placed a "buy" call on the stock of Strides Pharma with a price target of Rs 650, implying an upside potential of 22 per cent from the current market price.
Superior execution leads to recovery in US sales for the quarter
"After posting adjusted loss of Rs 274 million in 4QFY20, Strides Pharma (STR) made a strong comeback in 1QFY21 with adjusted PAT of Rs 560 million. This was on account of strong traction witnessed in the US / Other Regulated / Africa markets," the brokerage firm has stated.
It has increased the EPS estimate for FY21/FY22 by 19.6%/14.2% to factor a strong ANDA pipeline for the US market, good order-book visibility for the Other Regulated market, revival in Africa sales, and improved operating leverage.
"We roll our price target to Rs 650 on a 12 month forward SOTP basis. We remain positive on Strides Pharma on the back of considerable improvement expected in return ratios over FY20-22 and attractive valuations. Maintain Buy," Motilal Oswal Institutional Equities has stated.
Highlights from management commentary
While STR continues to gain market share in existing products, new launches would enable it to achieve sales of ~USD240m in the US for FY21 (compared with USD50m for 1QFY21).
STR has guided for 6-8 ANDA launches for FY21.
It has completed remediation measures, verified from third-party consultants, and awaits clarity from the USFDA regarding an inspection.
The growth prospects in Other Regulated remain promising on the back of enhanced product offerings as well as reach.
Net debt was Rs 10.1 billion at the end of 1QFY21.
Source: Motilal Oswal Institutional Equities