This Pharma Stock's Revenue Up 36% To Rs. 9.4b, US Sales Up 18%, Buy: Says Motilal Oswal

Reputed brokerage firm Motilal Oswal suggests investors to buy the stocks of Strides Pharma. The company's revenue increased by 36.6% to Rs. 9.4b in 1QFY23, driven by a recovery across business segments. Its US sales increased 18% YoY to Rs. 3.6b.

Stock To Buy: Target Price & Financial Result

The Current Market Price (CMP) of Strides Pharma is Rs. 330. Motilal Oswal has estimated a Target Price for the stock at Rs. 380. This stock has the potential to give a 15% return, in the upcoming 1 year. This is a small-cap stock with a market capitalization of around Rs. 3,153 crore. This stock is now available at a near-about 52-week low range.

Stock Outlook
Current Market Price (CMP)	Rs. 330
Target Price	Rs. 380
Potential 1 year return	15.00%
52 week high share price	Rs. 807.00
52 week low share price	Rs. 263.35

The company's other regulated market sales gained by 37% YoY to Rs. 3b, while emerging market sales gained 2x YoY to Rs. 2b. The company's gross margin (GM) has expanded by ~50bp YoY to 49.8%, and EBITDA margin stood at 5.4%, which has been on an uptrend for three quarters now. It has recorded an exceptional loss of Rs. 658m on account of forex loss, product recalls, and restructuring expenses.

Motilal Oswal: Why Should You Buy This Stock?

Giving a buy rating to the stock, Motilal Oswal stated, "Strides Pharma delivered an in-line revenue in 1QFY23. However, there has been an uptick in the margin on a sequential basis. The spillover of revenue for the US market to 2QFY23 and currency headwinds in other regulated markets (OTR) resulted in a lower than expected EBITDA margin in 1QFY23. It has reported an EBITDA of Rs. 512m as against an operating loss in 1QFY22. We value Strides Pharma on a SoTP basis, with an EV/EBITDA of 9x for its regulated and emerging markets, 6x for its Institutional segment, and add an investment value for its 33% stake in Stelis Biopharma to arrive at our target price of Rs. 380. We maintain our Buy rating."

Company portfolio: Strides Pharma

Incorporated in 1990, Strides Pharma Science Limited is a global pharmaceutical company headquartered in Bangalore, India. The Company has two business verticals, viz., Regulated Markets and Emerging Markets. Strides has a global manufacturing footprint with eight manufacturing facilities spread across 4 continents, including five US FDA approved facilities and 2 facilities for the rest of world markets. The Company has a dedicated R&D facility in India with global filing capabilities and a strong footprint across 100 countries. Recently, the company reported a loss of ~Rs. 934m. Stelis Biopharma incurred a loss of Rs. 1.3b in 1QFY23. It has a net negative working capital position amounting to Rs. 4.1b.

Disclaimer

The above stock was picked from the brokerage report of Motilal Oswal. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.