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HDFC Securities Sees 36% Upside To Strides Shasun

HDFC Securities initiated ‘Buy’ rating, with a target price of Rs 1,200. 

Pharmaceuticals manufacturing (Photographer: Dhiraj Singh/Bloomberg)
Pharmaceuticals manufacturing (Photographer: Dhiraj Singh/Bloomberg)

Brokerage house HDFC Securities initiated coverage on Strides Shasun Ltd. with a ‘Buy’ rating, with a target price of Rs 1,200, implying a potential upside of 36 percent from yesterday’s close

The drug maker possesses the potent combination of a diversified business mix, strong regulatory record, high growth potential and comfortable valuation, the brokerage house said in a note to clients.

HDFC Securities expects that the company’s filing/approval momentum to pick-up over the next 15-18 months.

With more than 20 launches expected over next two years, we believe the U.S. business will scale up to $230 million by FY20 from $95 million sales in FY17.
HDFC Securities Research Report

The brokerage expects sales and profit to grow at a compound annual growth rate of 18 percent and 34 percent, respectively over FY17-20. It said Australia, which contributes 23 percent towards revenue, may grow at a CAGR of 13 percent during the period.

Other Key Highlights

  • With no major capital expenditure and operating leverage to aid margins, expect return ratios to reach high-teens (18-19 percent) by FY20
  • Return on invested capital to expand by 500 basis points to 17 percent by FY20
  • Strong free cash flow generation of $250 million over FY18-20