Strides Pharma
BSE SENSEX
40,413
S&P CNX
11,910
11 December 2019
Update | Sector: Healthcare
CMP: INR360
TP: INR440 (+22% )
Buy
Biosimilars/Sterile
Injectables – new growth levers in the making
Strides Pharma’s (STR) US generics business has taken long strides with sales
Stock Info
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Free float (%)
STR IN
89
32.2 / 0.5
550 / 288
-11/-18/-37
648
68.7
increasing to USD57m in 2QFY20 from USD10m in 4QFY18. More levers are being
created to drive growth in this business over the next 4-5 years.
Through Stelis, STR is not only developing own biosimilars but also planning to
provide fully integrated CMO for drug products and substance.
In addition to the oral solids portfolio, STR plans to re-build the sterile injectable
portfolio with 15-20 annual filings of niche products using technology platforms built
in-house and also via strategic partnerships.
We expect earnings to increase 5x over FY19-21, partly led by a low base of FY19. We
continue valuing STR on an SOTP basis to arrive at a target price of INR440. Buy.
Financials Snapshot (INR b)
FY19 FY20E FY21E
Y/E MARCH
30.1
29.0
35.1
Net Sales
4.7
5.7
6.7
EBITDA (Rs b)
0.6
2.0
3.1
NP
6.9
22.8
34.3
EPS
-39.2 232.1
50.9
EPS Gr (%)
296.2 319.1 344.7
BV/Share (Rs)
52.5
15.8
10.5
P/E (x)
1.2
1.1
1.0
P/BV (x)
2.4
7.4
10.3
RoE (%)
4.9
6.8
7.6
RoCE (%)
Shareholding pattern (%)
As On
Sep-19 Jun-19 Sep-18
Promoter
31.3
31.2
30.8
DII
21.2
24.3
25.5
FII
25.3
25.3
22.1
Others
22.3
19.3
21.7
FII Includes depository receipts
Stock Performance (1-year)
Strides Pharma
Sensex - Rebased
600
525
450
375
300
US generics on robust growth path:
After delivering 31% CAGR in US generics
revenue over FY17-19, STR appears well positioned to sustain this momentum
led by its robust product pipeline (~40 under development/targets to file 20
ANDAs every year) and superior execution in approved products (led by ‘no
failure to supply’, integrated APIs and cost leadership). It targets to take the
annual revenue run-rate to ~USD400m over the next 12-18 months from
USD113m in 1HFY20.
Creating robust product pipeline in ‘follow-on’ biologics:
With an investment
of USD160m via Stelis, STR has built a fully integrated bio-pharma business with
products nearing the filing stage and availability of a manufacturing set-up for
commercial execution. This would not only be used for in-house biosimilars but
also to cater to CMO service with full integration of manufacturing. STR targets
to achieve revenue of USD150-250m in this business over the next 3-4 years.
Re-entering sterile injectables:
After the conclusion of the non-compete period
on the Agila transaction, STR will build a portfolio of sterile injectables which are
either under the shortage list or facing challenges in terms of manufacturing.
Further, it intends to use technology platforms via strategic partnerships to
build differentiated products in this business. Overall, STR intends to tap
opportunities with an aim to achieve revenue of USD200-400m over the next 2-
4 years.
New launches, increased penetration to drive business in other regulated
markets:
The two-pronged strategy of (a) increasing penetration of the already
approved products by entering new territories and (b) further building the
product portfolio led to strong revenue growth of 67% YoY from other regulated
markets in 1HFY20. Healthy order book, opportunities from product shortage
(particularly in the UK) and new launches in the EU will provide STR with a good
platform to grow business in the other regulated markets over the next 2-3
years (we forecast at least 50% revenue CAGR over the next two years).
Valuation and view:
STR is building multiple levers in the form of a healthy
ANDA pipeline and a specialized portfolio of injectables/bio pharma to deliver
strong earnings growth over the next 3-4 years. We expect earnings to increase
5x over FY19-21, partly led by a low base of FY19. We continue valuing STR on
an SOTP basis to arrive at a target price of INR440.
Maintain Buy.
Tushar Manudhane – Research analyst
(Tushar.Manudhane@MotilalOswal.com); +91 022 6129 1536
Hitakshi Chandrani – Research analyst
(Hitakshi.Chandrani@motilaloswal.com); +91 22 6129 1557
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Investors are advised to refer through important disclosures made at the last page of the Research Report.
 Motilal Oswal Financial Services
Strides Pharma
US generics on robust growth path
Targets to achieve exit annual run-rate of USD400m over next 12-18 months
STR’s annualized revenue of USD240m as of end-1HFY20 was contributed by a mix of
fully integrated manufacturing (40% of US sales) and niche opportunities (60% of US
sales).
The company has ~40 products under development, which provides visibility of 15-20
ANDA filings annually over the next two years.
Further, ~33 ANDAs are pending for approval. This, along with its increased market
share in existing products, will facilitate strong revenue momentum in this segment
over the next 2-3 years.
Sales run-rate on an uptrend, 42 products commercialized
From USD10m in 4QFY18, the company’s now has a quarterly sales run-rate of
USD57m as of end-2QFY20 from commercialization of ~42 products. STR has six
products (Ibuprofen, Ranitidine, Gabapentin, Mycophenolate, PEG and Oseltamivir)
delivering USD90-96m for 12 months ended Sept’19, wherein STR has complete
integration in terms of manufacturing. Particularly, in case of Ranitidine, STR is the
lone company with carcinogenic impurity within the permissible limits, driving
further market share gains in this product over the near to medium term.
Exhibit 1: US sales on strong upward trajectory
US sales (US$m)
230
151
95
120
281
FY17
FY18
FY19
FY20E
FY21E
Source: MOFSL, Company
STR has a niche portfolio of ~36 products where either competitive intensity is very
low or products are in niche dosages (soft gelatin capsules/liquids) or there is
complexity in terms of manufacturing. This portfolio delivered revenue of
~USD145m for the 12 months ended Sept’19.
Increased approvals to not only drive revenue but also improve operating
leverage
STR intends to further ramp-up this business with 15-20 ANDA filings and
accelerating market share gains in its already commercialized products. With
operational expense being largely factored in, the higher pace of revenue growth is
likely to improve operating leverage and profitability of this business over the next
2-3 years. Exiting partnered products by FY22 may have some overhang on overall
growth of this business over the medium term.
11 December 2019
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 Motilal Oswal Financial Services
Strides Pharma
Ramp-up in Singapore facility to further improve profitability
STR has invested USD55m in the Singapore facility, which would have peak capacity
of producing ~1.4b tablets and hard gelatin capsules. Note that Singapore-based
facilities are able to participate in the procurement program administered by the
Department of Veteran Affairs (VA). Further, incremental Ranitidine supply is likely
from this site. These factors would not only offset opex (under-recovery of INR150m
per quarter) but also support profitability at the consolidated level.
Exhibit 2: Manufacturing units and their recent USFDA status
Site Location
Bangalore, India
Alathur, Chennai
Puducherry, India
Singapore
Catering to
Emerging and Regulated market facility
Regulated market facility
Regulated market facility
Regulated market facility
Remarks
Inspected in May-19, EIR received
Inspected in Aug-19, EIR received
Inspected in May-19, OAI status, Warning Letter received
Inspected in Mar-19, EIR received
Source: Company, MOFSL
11 December 2019
3
 Motilal Oswal Financial Services
Strides Pharma
Stelis to provide CMO service/develop own biosimilars
Targets to achieve exit annual run-rate of USD150-250m in 36-48 months
STR has invested USD160m in Stelis till date (equity investment – USD35m). The
company would be infusing further USD40m which would increase its ownership to
54.1% (from 42.8%).
Through Stelis, STR is not only building own niche biosimilars but has also emerged as
a bio-pharma CMO service provider having full integration from development to
manufacturing.
The company is expected to breakeven at the operating level by FY21 and intends to
create further value over the next 3-4 years.
Considerable investment largely done; own products nearing filing stage
Stelis has done investment to the tune of USD160m toward building technical
expertise, R&D set-up and fully integrated manufacturing facility focusing on
biosimilars/novel biologics. While own biosimilars are likely to be launched over
FY22-23, the company is also making effort to gain contracts as a CMO service
provider. Further, Stelis’ manufacturing set-up would be utilized for producing
sterile injectables developed by STR.
Exhibit 3: Stelis’ biosimilar pipeline spread across different stages
Source: MOFSL, Company
Rh-Teriparatide biosimilar on track for EM/EU launch in FY22
Therapeutic use:
This product is a remedy for women suffering from post-
menopause osteoporosis. It comes in reusable/disposable pen filled cartridge pre
filled with multi-dose.
11 December 2019
4
 Motilal Oswal Financial Services
Strides Pharma
Filings in key EU/US market in 2QCY20/FY21
Stelis completed EU approval determining the PK comparability study in
Australia with Stelis Teriparatide compared to Forsteo and Forteo.
EU filing is likely in 2QCY20 and the US dossier submission under 505(b) (2) in
FY21.
Stelis expects EM and EU launch in FY22 followed by US launch in FY23.
It is in advanced-stage discussion for a significant licensing opportunity for EU,
the US and Japan.
Stelis is the
only developer
to serve the product in
both reusable and disposable
pen device,
serving global demand.
In active discussion across key markets
The estimated global market opportunity is USD1.9b. Geography wise, North
America has the largest opportunity size (~55% of the global market size), followed
by RoW (~28%) and Europe (~17%). Stelis is in discussion with 37 companies for
commercialization rights globally,
with advanced-stage licensing discussions in the
EU, the US and Japan for preferred contractual arrangement.
Sodium Hyaluronate (HA) – updating EU dossier and awaiting
clarity from USFDA
Stelis’ Sodium Hyaluronate product is in phase-III of clinical trials and likely to be
launched in the market by FY23. The USFDA has recently re-designated it as a drug
device (v/s class-3 device previously). Stelis expects the USFDA response on the pre-
IND package front by Dec’19.
Therapeutic use:
This product is a remedy for osteoarthritis knee pain. It comes in
inter-articular injection form.
Stelis: WIP based on revised regulatory guidelines
Stelis is working on global development of the product as a device with filing
completed for the EU market. Meanwhile, EU issued new device guidelines
effective May’20 and Stelis is updating the dossier to comply with the same.
In the US, the FDA has re-designated HA as a drug-device (v/s class-3 device
previously). Recently, it filed for pre-IND package to confirm the clinical
pathway.
It is expected to be commercialized by FY22 with a hybrid development strategy.
Leads on key parameters compared to peers
Stelis’ HA is the first non-avian, non-cross-linked, high molecular weight low-volume
single injection for osteoarthritis. The quality of the product stands no compromise
as it comes with in-house API process and formulation development along with
complete control of production process from bio-material to finished device.
Product uniqueness and shift toward single injection
The estimated global market opportunity is USD2.5b, with the top four companies
commanding a 65% market share. Geography wise, the US has the largest
opportunity size (~53% of the global market size), followed by APAC (~35%) and
RoW (~12%).
11 December 2019
5
 Motilal Oswal Financial Services
Strides Pharma
Demand is likely to shift toward single injection (expected CAGR of 10% over CY18-
23) from multi- doses, given benefits such as reduced hospital visits, convenience
and reduced pain offered by the former (Exhibit 2). Product demand will also be
driven by increasing geriatric population.
Stelis is in discussion with 24 companies for
commercialization rights globally.
Exhibit 4: Shift from multi-injections to single injection
Inj. Regime
5 injections
3 Injections
1 injection
CY2015
~300
~850
~600
CY2018
~349
~1123
~850
CY2023
~300
~1,350
~1,250
18-23 CAGR
~-3%
~5%
~10%
Source: MOFSL, Company
Favorable regulations, low-cost tech platforms bolster prospects
in insulin
Stelis has four insulin biosimilars in its pipeline: Aspart, Rh-insulin, Lispro and
Glargine. These products are in their preclinical trial stage (except Glargine) and
likely to be in the market by FY24-25. Insulin Glargine is ready for scale up in the
production stage. Glargine expression system E.coli is same as the one used for
Lantus. The impurity profile is same and thus the risk and residual uncertainty are
reduced considerably.
Acquired technology with internal capabilities facilitates low-cost
development
Stelis has acquired proprietary technology from ex-Eli Lilly scientists for the generic
insulin product, which comes at low cost with fewer purification steps. Also, it has
internal capability to develop and supply insulin DS and DP, helping the company to
achieve cost leadership at all stages of the product lifecycle.
Phase-III study waiver by EU to reduce time/effort to get approval for
biosimilar version
Analyzing the impact on cost of healthcare, Europe has actively adopted biosimilar
products and designed specific guidelines for insulin products, which came into
effect in late-2015. The EU authorities have waived off the need to perform a phase-
III efficacy study for insulin for marketing authorization. Also, with appropriate
justification, pre-licensing safety study between biosimilar insulin and the reference
insulin can be waived off.
US too focused on reducing timeline for biosimilar development
The recent notification from the USFDA suggests that a comparative
immunogenicity study may not be required. This change is likely to shorten the
development timeline and significantly reduce development costs.
Increasing demand from diabetic patients
The global insulin market is likely to grow on the back of demand from ~500m
diabetic patients. Insulin analogs are a mainstay of treatment for T1 and T2DM
11 December 2019
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 Motilal Oswal Financial Services
Strides Pharma
diabetes. The estimated global market opportunity is USD12.6b. Geography wise,
North America has the largest opportunity size (~77% of the global market size),
followed by RoW (~12%) and Europe (~11%) Stelis is in discussion with 14
companies for commercialization rights globally. It plans to develop disposable and
reusable pens.
Comprehensive service offerings (CMO) by CDMO
Global biopharma contract manufacturing is estimated to be USD26b in value by
2023. Demand is likely to accelerate on the back of capacity constraints for market
entrants and startups. Evolving technology makes it difficult for existing plants to
scale up the productivity level, which is where the CDMO services would come to
disposal of those companies.
India stands third and accounts for 12% of globally outsourced projects after North
America (30%) and Western Europe (14%). An average commercial contract earns
USD20-30m/year, which would sum up to USD100-150m for five years as the project
is developed from Phase 1 to Biological License application (BLA) stage over these
years.
Exhibit 5: Geographical spilt: Outsourced projects
Market by region
China and
other
Emerging
markets
44%
India
12%
North
America
30%
Exhibit 6: Contract cost breakup- Phase-wise
•Average Phase I Project is USD2.4M
Phase
•Duration: 2-3 years
1
•Average Phase II Project is USD3.2M
Phase
•Duration: 2-4 years
2
•Average Phase III Project is $5.6M
Phase
•Duration: 3-5 years
3
•Average Process Performance Qualification
Project is $12-15M
BLA
Source: MOFSL, Company
Western
Europe
14%
Source: MOFSL, Company
Full-scale service – a big advantage
Stelis offers full-scale services from development to manufacturing. On the R&D
front, the company offers upstream/downstream, formulation and analytical
development services. It also helps in process scale-up via microbial/mammalian
upstream/downstream process scale-up and formulation fill/finish services. On the
manufacturing side, it offers CDMO services like DS manufacturing, formulation,
aseptic fill and finish, sterile injectable fill and finish.
Note that Stelis’ CDMO site complies with various global standards (US, EU, WHO,
PICS etc.) and thus can take up projects globally. Based on expected market demand
and the company’s readiness in offering comprehensive CDMO services, we expect
gradual traction in this segment, going forward.
11 December 2019
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 Motilal Oswal Financial Services
Strides Pharma
Exhibit 7: Stelis : Comprehensive CDMO services offered
Source: MOFSL, Company
STR’s holding in Stelis to increase to 54%
Stelis has made an investment of USD160m till date, of which USD91m is in the form
of equity. Of this USD91m, STR’s investment is USD35m and it holds a 43% stake in
Stelis. STR would further infuse USD40m which would raise its stake to 54%.
Exhibit 8: STR’s ownership change in Stelis
Partners
Strides
Minority investors
Total
No Of Shares
4,06,434
5,44,091
9,50,525
Current Ownership
Value (USD)
34.7
56.4
91.1
Holding (%)
42.8
57.2
100
Ownership after infusion of investments
No Of Shares
Value (USD)
Holding (%)
7,26,409
74.6
54.1
6,15,910
70.5
45.9
13,42,319
145.1
100
Source: MOFSL, Company
11 December 2019
8
 Motilal Oswal Financial Services
Strides Pharma
Back with better economics in sterile injectables
Targets to achieve annual exit sales of USD200-400m over 24-48 months
With the conclusion of the non-compete agreement signed during the sale of the Agila
business to Mylan, STR is now set to re-enter the sterile injectables segment.
Overall investment in this segment for phase-I would be INR2b at entity level (STR has
54% ownership).
STR is ready to execute submission batches for 10+ in-licensed products from Jan’20.
Injectables – an attractive and niche opportunity
The ~USD70b global generics injectables market is likely to deliver a CAGR of 13%
over the next 2-3 years. Competitive intensity remains benign, given supply
disruption due to regulatory concerns, API sourcing, complex manufacturing, and
higher operational/capital cost. Notably, in the FDA’s list of shortage drugs, 60%
were injectables.
Multi-pronged strategy to reduce lead time to market
STR has identified 27 products across base and differentiated category with an
addressable market size of ~USD5b. Particularly,
The company would be executing submission batches for in-licensed products
shortly and for in-house R&D projects by Aug’20.
STR intends to have 15-20 filings every year in this segment. In addition to in-
house R&D (including freeze dried technology), the company would have
strategic partnerships for a technology platform, which would enhance drug
stability, improve bioavailability and cold chain management.
With the focused drugs in the shortage list, approvals will likely be fast tracked,
reducing lead time to market for STR.
Most products would utilize the group’s manufacturing network. This will not
only ensure compliance but also timely availability of required raw material.
Sterile injectables to require investment of INR2b in first phase
The bulk of the INR2b investment for Sterile 2.0 would be toward product
development and filings. The economic interest of STR would be 54% in sterile
injectables entity. Manufacturing asset built by Stelis would be utilized for
commercialization of products post approval.
Strong team in place for superior execution
STR has already put in place a team comprising technical leadership, project
management/manufacturing and quality/compliance to execute strategy of sterile
injectables. Interestingly, STR has ex-Agila CEO (Venkat Iyer), ex-Agila global head of
manufacturing and SCM (Sundhar CK) and ex-Agila head of quality assurance (Biju
Mathew) who have strong expertise in injectables, pharmaceutical projects and
compliance.
11 December 2019
9
 Motilal Oswal Financial Services
Strides Pharma
Valuation and view
FY19 was a year of trough in terms of earnings for STR, in our view. Prospects
appear promising over the next 2-3 years, backed by its increased market share
in approved products/new launches and improving product availability in other
regulatory markets. This apart, STR is building a niche portfolio of
biosimilars/injectables to drive growth beyond the medium term.
We expect 5x earnings growth over FY19-21, partly led by a low base of FY19.
We continue to value STR on an SOTP basis to arrive at a price target of INR440.
Re-iterate Buy.
Exhibit 10: Margins to improve led by revenue growth
Gross Margin(%)
53.3
33.7
55.9
47.5
51.4
EBITDA Margin(%)
51.3
56.9
54.2
Exhibit 9: Expect revenue CAGR of 8% over FY19-21
Revenue from operations (INR bn)
10.8
FY14
12.0
FY15
28.6
FY16
34.8
FY17
28.4
FY18
30.1
FY19
29.0
35.1
16.6
FY14
19.1
FY15
14.5
FY16
18.5
FY17
14.0
FY18
15.5
FY19
19.7
19.0
FY20E FY21E
FY20E FY21E
Exhibit 11: EPS to improve significantly over FY19-21
EPS
32.3
22.8
18.2
7.3
11.3
11.3
34.3
Exhibit 12: Superior execution to drive RoE going forward
ROE (%)
9.4
10.8
8.5
7.4
3.9
10.3
6.9
2.4
FY14
FY15
FY16
FY17
FY18
FY19
FY20E FY21E
FY15
FY16
FY17
FY18
FY19
FY20E
FY21E
Source: : MOFSL, Company
Source: : MOFSL, Company
Exhibit 13: P/E chart
280
210
140
70
0
P/E (x)
Min (x)
Avg (x)
+1SD
Max (x)
-1SD
Exhibit 14: P/B chart
10.5
8.0
5.5
P/B (x)
Min (x)
Avg (x)
+1SD
Max (x)
-1SD
222.9
111.3
62.0
10.8
12.6
8.0
4.9
3.2
0.9
1.6
12.1
3.0
0.5
1.1
Source: MOFSL, Company, Bloomberg
Source: MOFSL, Company, Bloomberg
11 December 2019
10
 Motilal Oswal Financial Services
Strides Pharma
Financials and Valuations
Consolidated - Income Statement
Y/E March
Total Income from Operations
Change (%)
EBITDA
Margin (%)
Depreciation
EBIT
Int. and Finance Charges
Other Income
PBT bef. EO Exp.
EO Items
PBT after EO Exp.
Total Tax
Tax Rate (%)
Minority Interest
Reported PAT from Continuing Ops.
Adj. PAT from Continuing Ops.
Change (%)
Margin (%)
FY15
11,959
-10.8
2,288
19.1
640
1,648
474
386
1,560
-74
1,486
532
35.8
-6
16
1,007
54.7
8.4
FY16
28,622
139.3
4,140
14.5
1,313
2,827
1,682
921
2,067
-414
1,653
425
25.7
-88
1,317
1,624
61.3
5.7
FY17
34,834
21.7
6,428
18.5
1,872
4,557
2,269
1,686
3,973
-1,006
2,967
470
15.8
458
2,039
2,886
77.6
8.3
FY18
28,394
-18.5
3,965
14.0
1,540
2,425
1,962
941
1,403
-436
967
97
10.1
168
702
1,007
-65.1
3.5
FY19
30,117
6.1
4,662
15.5
1,719
2,944
2,053
340
1,230
-26
1,204
131
10.9
483
589
613
-39.2
2.0
FY20E
28,993
-3.7
5,712
19.7
1,742
3,969
1,628
428
2,769
741
3,510
246
7.0
520
2,745
2,035
232.1
7.0
(INR M)
FY21E
35,070
21.0
6,663
19.0
1,892
4,772
949
175
3,998
0
3,998
560
14.0
368
3,071
3,071
50.9
8.8
Consolidated - Balance Sheet
Y/E March
Equity Share Capital
Total Reserves
Net Worth
Minority Interest
Total Loans
Deferred Tax Liabilities
Capital Employed
FY15
596
10,853
11,449
187
8,917
-54
20,500
9,437
3,792
5,645
1,368
1,712
6,300
9,668
2,077
3,900
1,469
2,223
4,194
2,065
1,268
861
5,474
20,500
FY16
894
25,685
26,579
502
35,418
-502
61,997
18,987
1,468
17,520
9,267
8,149
13,409
25,256
6,131
10,330
3,116
5,679
11,605
7,836
2,943
826
13,652
61,997
FY17
894
26,210
27,104
1,640
36,997
89
65,829
22,233
2,771
19,462
9,670
7,802
15,952
27,582
7,380
9,971
3,295
6,936
14,638
7,521
5,986
1,131
12,944
65,829
FY18
895
23,651
24,546
1,547
29,494
-615
54,971
26,233
4,311
21,922
9,147
3,220
8,159
21,721
5,520
8,822
3,033
4,346
9,220
7,121
1,364
736
12,501
54,971
FY19
895
25,592
26,487
1,530
37,781
534
66,331
28,784
6,030
22,755
13,691
5,060
8,740
28,288
8,707
9,872
5,167
4,543
12,223
8,942
1,446
1,835
16,065
66,331
FY20E
895
27,637
28,532
1,530
27,281
534
57,877
33,440
7,772
25,668
9,491
1,620
8,740
23,675
7,964
9,504
1,834
4,373
11,337
8,178
1,392
1,767
12,337
57,877
(INR M)
FY21E
895
29,926
30,821
1,530
25,506
534
58,391
35,344
9,664
25,681
9,491
932
8,740
27,326
9,717
11,496
824
5,290
13,800
9,979
1,684
2,137
13,526
58,391
Gross Block
Less: Accum. Deprn.
Net Fixed Assets
Goodwill on Consolidation
Capital WIP
Total Investments
Curr. Assets, Loans&Adv.
Inventory
Account Receivables
Cash and Bank Balance
Loans and Advances
Curr. Liability & Prov.
Account Payables
Other Current Liabilities
Provisions
Net Current Assets
Appl. of Funds
11 December 2019
11
 Motilal Oswal Financial Services
Strides Pharma
Financials and Valuations
Ratios
Y/E March
EPS
Cash EPS
BV/Share
DPS
Payout (%)
Valuation (x)
P/E
Cash P/E
P/BV
EV/Sales
EV/EBITDA
Dividend Yield (%)
FCF per share
Return Ratios (%)
RoE
RoCE
RoIC
Working Capital Ratios
Fixed Asset Turnover (x)
Asset Turnover (x)
Inventory (Days)
Debtor (Days)
Creditor (Days)
Leverage Ratio (x)
Current Ratio
Interest Cover Ratio
Net Debt/Equity
FY15
11.3
18.4
128.0
71.9
43,880.3
32.0
19.5
2.8
3.3
17.3
20.0
-17.6
9.4
7.3
10.8
1.3
0.6
63
119
63
2.3
3.5
0.1
FY16
18.2
32.8
297.2
0.8
6.2
19.8
11.0
1.2
2.3
15.6
0.2
-32.7
8.5
6.8
8.7
1.5
0.5
78
132
100
2.2
1.7
0.7
FY17
32.3
53.2
303.1
0.0
0.0
11.2
6.8
1.2
1.9
10.3
0.0
-43.2
10.8
8.3
10.1
1.6
0.5
77
104
79
1.9
2.0
0.7
FY18
11.3
28.5
274.5
2.0
25.5
32.0
12.6
1.3
2.1
14.8
0.6
54.8
3.9
5.1
5.5
1.1
0.5
71
113
92
2.4
1.2
0.7
FY19
6.9
26.1
296.2
1.7
25.5
52.5
13.8
1.2
2.2
13.9
0.5
-65.3
2.4
4.9
6.0
1.0
0.5
106
120
108
2.3
1.4
0.9
FY20E
22.8
42.2
319.1
7.8
25.5
15.8
8.5
1.1
2.0
10.1
2.2
107.2
7.4
6.8
7.9
0.9
0.5
100
120
103
2.1
2.4
0.6
FY21E
34.3
55.5
344.7
8.7
25.5
10.5
6.5
1.0
1.6
8.5
2.4
30.1
10.3
7.6
8.8
1.0
0.6
101
120
104
2.0
5.0
0.5
Consolidated - Cash Flow Statement
Y/E March
OP/(Loss) before Tax
Depreciation
Interest & Finance Charges
Direct Taxes Paid
(Inc)/Dec in WC
CF from Operations
Others
CF from Operating incl EO
(Inc)/Dec in FA
Free Cash Flow
(Pur)/Sale of Investments
Others
CF from Investments
Issue of Shares
Inc/(Dec) in Debt
Interest Paid
Dividend Paid
Others
CF from Fin. Activity
Inc/Dec of Cash
Opening Balance
Closing Balance
FY15
9,920
640
163
-560
-959
9,205
-8,371
834
-2,406
-1,572
4,515
427
2,536
31
3,208
-381
-7,070
0
-4,213
-843
2,312
1,469
FY16
1,464
1,520
998
-770
-3,417
-206
938
732
-3,658
-2,925
286
-25,153
-28,525
12,264
18,789
-1,347
-251
-15
29,439
1,647
1,469
3,116
FY17
4,971
1,987
1,521
-586
-3,413
4,480
-1,599
2,881
-6,746
-3,865
1,269
-607
-6,084
165
5,962
-2,370
-376
0
3,382
179
3,116
3,295
FY18
1,153
1,540
1,022
-97
182
3,800
0
3,800
1,104
4,904
7,793
941
9,838
1
-7,525
-1,962
-179
-4,234
-13,899
-262
3,295
3,033
FY19
1,230
1,719
1,714
-131
-1,431
3,100
0
3,100
-8,935
-5,835
-581
340
-9,176
0
8,287
-2,053
-150
2,126
8,210
2,134
3,033
5,167
FY20E
3,510
1,742
1,200
-246
395
6,602
0
6,602
2,984
9,586
0
428
3,412
0
-10,500
-1,628
-699
-520
-13,347
-3,333
5,167
1,834
(INR M)
FY21E
3,998
1,892
774
-560
-2,199
3,905
0
3,905
-1,216
2,689
0
175
-1,041
0
-1,775
-949
-782
-368
-3,874
-1,010
1,834
824
11 December 2019
12
 Motilal Oswal Financial Services
Strides Pharma
Explanation of Investment Rating
Investment Rating
BUY
SELL
NEUTRAL
UNDER REVIEW
NOT RATED
Expected return (over 12-month)
>=15%
< - 10%
< - 10 % to 15%
Rating may undergo a change
We have forward looking estimates for the stock but we refrain from assigning recommendation
*In case the recommendation given by the Research Analyst is inconsistent with the investment rating legend for a continuous period of 30 days, the Research Analyst shall within following 30
days take appropriate measures to make the recommendation consistent with the investment rating legend.
Disclosures
The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the Regulations).
Motilal Oswal Financial Services Ltd. (MOFSL) is a SEBI Registered Research Analyst having registration no. INH000000412. MOFSL, the Research Entity (RE) as defined in the Regulations,
is engaged in the business of providing Stock broking services, Investment Advisory Services, Depository participant services & distribution of various financial products. MOFSL is a subsidiary
company of Passionate Investment Management Pvt. Ltd.. (PIMPL). MOFSL is a listed public company, the details in respect of which are available on www.motilaloswal.com. MOFSL
(erstwhile Motilal Oswal Securities Limited - MOSL) is registered with the Securities & Exchange Board of India (SEBI) and is a registered Trading Member with National Stock Exchange of
India Ltd. (NSE) and Bombay Stock Exchange Limited (BSE), Multi Commodity Exchange of India Limited (MCX) and National Commodity & Derivatives Exchange Limited (NCDEX) for its
stock broking activities & is Depository participant with Central Depository Services Limited (CDSL) National Securities Depository Limited (NSDL),NERL, COMRIS and CCRL and is member
of Association of Mutual Funds of India (AMFI) for distribution of financial products and Insurance Regulatory & Development Authority of India (IRDA) as Corporate Agent for insurance
products.
Details of associate entities of Motilal Oswal Financial Services Limited are available on the website at
http://onlinereports.motilaloswal.com/Dormant/documents/List%20of%20Associate%20companies.pdf
MOFSL and its associate company(ies), their directors and Research Analyst and their relatives may; (a) from time to time, have a long or short position in, act as principal in, and buy or sell
the securities or derivatives thereof of companies mentioned herein. (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a
market maker in the financial instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have any other potential conflict of
interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the specific recommendations made by the
analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOFSL even though there might exist an inherent conflict of interest in
some of the stocks mentioned in the research report
MOFSL and / or its affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result, the recipients of this report should be aware
that MOFSL may have a potential conflict of interest that may affect the objectivity of this report. Compensation of Research Analysts is not based on any specific merchant banking, investment
banking or brokerage service transactions. Details of pending Enquiry Proceedings of Motilal Oswal Financial Services Limited are available on the website at
https://galaxy.motilaloswal.com/ResearchAnalyst/PublishViewLitigation.aspx
A graph of daily closing prices of securities is available at
www.nseindia.com, www.bseindia.com.
Research Analyst views on Subject Company may vary based on Fundamental research and
Technical Research. Proprietary trading desk of MOFSL or its associates maintains arm’s length distance with Research Team as all the activities are segregated from MOFSL research activity
and therefore it can have an independent view with regards to Subject Company for which Research Team have expressed their views.
Regional Disclosures (outside India)
This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability or use
would be contrary to law, regulation or which would subject MOFSL & its group companies to registration or licensing requirements within such jurisdictions.
For Hong Kong:
This report is distributed in Hong Kong by Motilal Oswal capital Markets (Hong Kong) Private Limited, a licensed corporation (CE AYY-301) licensed and regulated by the Hong Kong Securities
and Futures Commission (SFC) pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) “SFO”. As per SEBI (Research Analyst Regulations) 2014 Motilal
Oswal Securities (SEBI Reg No. INH000000412) has an agreement with Motilal Oswal capital Markets (Hong Kong) Private Limited for distribution of research report in Hong Kong. This report
is intended for distribution only to “Professional Investors” as defined in Part I of Schedule 1 to SFO. Any investment or investment activity to which this document relates is only available to
professional investor and will be engaged only with professional investors.” Nothing here is an offer or solicitation of these securities, products and services in any jurisdiction where their offer
or sale is not qualified or exempt from registration. The Indian Analyst(s) who compile this report is/are not located in Hong Kong & are not conducting Research Analysis in Hong Kong.
For U.S.
Motilal Oswal Financial Services Limited (MOFSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under applicable state
laws in the United States. In addition MOFSL is not a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together with the 1934
Act, the "Acts), and under applicable state laws in the United States. Accordingly, in the absence of specific exemption under the Acts, any brokerage and investment services provided by
MOFSL , including the products and services described herein are not available to or intended for U.S. persons. This report is intended for distribution only to "Major Institutional Investors" as
defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as "major institutional investors"). This document must not be acted on or relied on
by persons who are not major institutional investors. Any investment or investment activity to which this document relates is only available to major institutional investors and will be engaged in
only with major institutional investors. In reliance on the exemption from registration provided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") and
interpretations thereof by the U.S. Securities and Exchange Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S., MOFSL has entered into a
chaperoning agreement with a U.S. registered broker-dealer, Motilal Oswal Securities International Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be
executed within the provisions of this chaperoning agreement.
The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S. registered
broker-dealer, MOSIPL, and therefore, may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public appearances and trading
securities held by a research analyst account.
For Singapore
In Singapore, this report is being distributed by Motilal Oswal Capital Markets Singapore Pte Ltd (“MOCMSPL”) (Co.Reg. NO. 201129401Z) which is a holder of a capital markets services
license and an exempt financial adviser in Singapore.As per the approved agreement under Paragraph 9 of Third Schedule of Securities and Futures Act (CAP 289) and Paragraph 11 of First
Schedule of Financial Advisors Act (CAP 110) provided to MOCMSPL by Monetary Authority of Singapore. Persons in Singapore should contact MOCMSPL in respect of any matter arising
from, or in connection with this report/publication/communication. This report is distributed solely to persons who qualify as “Institutional Investors”, of which some of whom may consist of
"accredited" institutional investors as defined in section 4A(1) of the Securities and Futures Act, Chapter 289 of Singapore (“the SFA”). Accordingly, if a Singapore person is not or ceases to be
such an institutional investor, such Singapore Person must immediately discontinue any use of this Report and inform MOCMSPL.
Specific Disclosures
1 MOSL, Research Analyst and/or his relatives does not have financial interest in the subject company, as they do not have equity holdings in the subject company.
2 MOSL, Research Analyst and/or his relatives do not have actual/beneficial ownership of 1% or more securities in the subject company
3 MOSL, Research Analyst and/or his relatives have not received compensation/other benefits from the subject company in the past 12 months
4 MOSL, Research Analyst and/or his relatives do not have material conflict of interest in the subject company at the time of publication of research report
5 Research Analyst has not served as director/officer/employee in the subject company
6 MOSL has not acted as a manager or co-manager of public offering of securities of the subject company in past 12 months
7 MOSL has not received compensation for investment banking/ merchant banking/brokerage services from the subject company in the past 12 months
8 MOSL has not received compensation for other than investment banking/merchant banking/brokerage services from the subject company in the past 12 months
9 MOSL has not received any compensation or other benefits from third party in connection with the research report
10 MOSL has not engaged in market making activity for the subject company
********************************************************************************************************************************
The associates of MOFSL may have:
-
financial interest in the subject company
-
actual/beneficial ownership of 1% or more securities in the subject company
-
received compensation/other benefits from the subject company in the past 12 months
11 December 2019
13
 Motilal Oswal Financial Services
Strides Pharma
other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the specific
recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOFSL even though there
might exist an inherent conflict of interest in some of the stocks mentioned in the research report.
-
acted as a manager or co-manager of public offering of securities of the subject company in past 12 months
-
be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the company(ies)
discussed herein or act as an advisor or lender/borrower to such company(ies)
-
received compensation from the subject company in the past 12 months for investment banking / merchant banking / brokerage services or from other than said services.
The associates of MOFSL has not received any compensation or other benefits from third party in connection with the research report
Above disclosures include beneficial holdings lying in demat account of MOFSL which are opened for proprietary investments only. While calculating beneficial holdings, It does not consider
demat accounts which are opened in name of MOFSL for other purposes (i.e holding client securities, collaterals, error trades etc.). MOFSL also earns DP income from clients which are not
considered in above disclosures.
Analyst Certification
The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the research
analyst(s) was, is, or will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report.
Terms & Conditions:
This report has been prepared by MOFSL and is meant for sole use by the recipient and not for circulation. The report and information contained herein is strictly confidential and may not be
altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of MOFSL. The report is
based on the facts, figures and information that are considered true, correct, reliable and accurate. The intent of this report is not recommendatory in nature. The information is obtained from
publicly available media or other sources believed to be reliable. Such information has not been independently verified and no guaranty, representation of warranty, express or implied, is made
as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. The report is prepared solely for informational purpose and does not
constitute an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments for the clients. Though disseminated to all the customers
simultaneously, not all customers may receive this report at the same time. MOFSL will not treat recipients as customers by virtue of their receiving this report.
Disclaimer:
The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or
in whole, to any other person or to the media or reproduced in any form, without prior written consent. This report and information herein is solely for informational purpose and may not be
used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Nothing in this report constitutes investment, legal,
accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in this
report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This
may not be taken in substitution for the exercise of independent judgment by any recipient. Each recipient of this document should make such investigations as it deems necessary to arrive at
an independent evaluation of an investment in the securities of companies referred to in this document (including the merits and risks involved), and should consult its own advisors to
determine the merits and risks of such an investment. The investment discussed or views expressed may not be suitable for all investors. Certain transactions -including those involving futures,
options, another derivative products as well as non-investment grade securities - involve substantial risk and are not suitable for all investors. No representation or warranty, express or implied,
is made as to the accuracy, completeness or fairness of the information and opinions contained in this document. The Disclosures of Interest Statement incorporated in this document is
provided solely to enhance the transparency and should not be treated as endorsement of the views expressed in the report. This information is subject to change without any prior notice. The
Company reserves the right to make modifications and alternations to this statement as may be required from time to time without any prior approval. MOFSL, its associates, their directors and
the employees may from time to time, effect or have effected an own account transaction in, or deal as principal or agent in or for the securities mentioned in this document. They may perform
or seek to perform investment banking or other services for, or solicit investment banking or other business from, any company referred to in this report. Each of these entities functions as a
separate, distinct and independent of each other. The recipient should take this into account before interpreting the document. This report has been prepared on the basis of information that is
already available in publicly accessible media or developed through analysis of MOFSL. The views expressed are those of the analyst, and the Company may or may not subscribe to all the
views expressed therein. This document is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or
published, copied, in whole or in part, for any purpose. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any
locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject MOFSL to any registration or
licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose
possession this document may come are required to inform themselves of and to observe such restriction. Neither the Firm, not its directors, employees, agents or representatives shall be
liable for any damages whether direct or indirect, incidental, special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the information.
The person accessing this information specifically agrees to exempt MOFSL or any of its affiliates or employees from, any and all responsibility/liability arising from such misuse and agrees not
to hold MOFSL or any of its affiliates or employees responsible for any such misuse and further agrees to hold MOFSL or any of its affiliates or employees free and harmless from all losses,
costs, damages,
expenses that may be suffered by the person accessing this information due to any errors and delays.
Registered Office Address: Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai-400025; Tel No.: 022 71934200/ 022-71934263; Website
www.motilaloswal.com.CIN no.: L67190MH2005PLC153397.Correspondence Office Address: Palm Spring Centre, 2nd Floor, Palm Court Complex, New Link Road, Malad(West), Mumbai-
400 064. Tel No: 022 7188 1000.
Registration Nos.: Motilal Oswal Financial Services Limited (MOFSL)*: INZ000158836(BSE/NSE/MCX/NCDEX); CDSL and NSDL: IN-DP-16-2015; Research Analyst: INH000000412. AMFI:
ARN - 146822; Investment Adviser: INA000007100; Insurance Corporate Agent: CA0579;PMS:INP000006712. Motilal Oswal Asset Management Company Ltd. (MOAMC): PMS (Registration
No.: INP000000670); PMS and Mutual Funds are offered through MOAMC which is group company of MOFSL. Motilal Oswal Wealth Management Ltd. (MOWML): PMS (Registration No.:
INP000004409) is offered through MOWML, which is a group company of MOFSL. Motilal Oswal Financial Services Limited is a distributor of Mutual Funds, PMS, Fixed Deposit, Bond,
NCDs,Insurance Products and IPOs.Real Estate is offered through Motilal Oswal Real Estate Investment Advisors II Pvt. Ltd. which is a group company of MOFSL. Private Equity is offered
through Motilal Oswal Private Equity Investment Advisors Pvt. Ltd which is a group company of MOFSL. Research & Advisory services is backed by proper research. Please read the Risk
Disclosure Document prescribed by the Stock Exchanges carefully before investing. There is no assurance or guarantee of the returns. Investment in securities market is subject to market risk,
read all the related documents carefully before investing. Details of Compliance Officer: Name: Neeraj Agarwal, Email ID: na@motilaloswal.com, Contact No.:022-71881085.
* MOSL has been amalgamated with Motilal Oswal Financial Services Limited (MOFSL) w.e.f August 21, 2018 pursuant to order dated July 30, 2018 issued by Hon'ble National Company Law
Tribunal, Mumbai Bench.
-
11 December 2019
14