Strides Acrolab Multibagger

Company Overview:

Strides Acrolab is an MNC type Pharmaceutical company founded in 1990 and it Headquarters are in Bangalore. Acrolab Key Products is advance and produce of IP-led role pharmaceutical products, particularly sterile injectables. It is amongst the world’s chief soft gelatin capsule manufacturers.

Strides Acrolab has manufacturing facilities in 14 locations globally, a 350-scientist strong R&D hub in Bangalore and marketing network in more than 75 developed and emerging markets. In addition, it has also partnered with several of the world’s leading pharmaceutical companies. The Key Persons were Arun Kumar, K R Ravi Shankar, Deepak Vaidya and Abir Mukarjee.

Company Revenue Background:

The contract is pending completion as Foreign Investment promotion Board (FIPB) has deferred its opinion on the deal, on concern of ownership of few remaining critical cancer-making facilities falling in hands of MNCs. On the other hand, it has been cleared by Competition Commission of India, as domestic sales account for less than 5% of its consolidated sales.

While, 31st December 2012, Strides Acrolab equity was Rs. 58.8 crore and net worth Rs. 2,026 crore, translating to Book Value of Equity Per Share of Rs. 345, on a consolidated basis. It has net debt of about Rs. 1,150 crore.

Scheduled by 27th February 2013, Strides Acrolab entered into sale agreement for its wholly owned specialties business housed under Agila Specialties Pvt. Ltd. to Mylan Inc for US $ 1.60 billion in cash, in addition to US $ 250 million, upon meeting certain conditions, taking the total deal size to US $ 1.85 billion. Agila, accounting for 60 percent of CY12 revenues and 77 percent of annual Earnings before Interest Tax Depreciation Amortization, is focused in are like oncolytics, penems, pencillins, cephalosporins, ophthalmics, peptides &  biosimilars.

Since 31st March 2013, promoters held 27.39 percent, while 117 Foreign Institutional Investors held 45.51% (up from 37.33 percent on 31st December 2012). Domestic funds hold 10.34 percent, leaving public float of 16.76 percent among 30,000 retail investors. The Strides Acrolab counts Goldman Sachs, Morgan Stanley, Deutsche Securities, HSBC Global, Reliance Capital and Reliance Life among others, as major shareholders.

Strides Acrolab, following calendar year for financial reporting, has reported consolidated revenues of Rs. 2,307 crore for CY12. Its profit before tax (PBT) stood at Rs. 950 crore, thanks to the Rs. 658 crore outstanding profits on sale of its 94% stake in Australia’s Ascent Pharma to Watson Pharma.

While statement CY12 PAT stood at Rs. 947 crore, while adjusting for the exceptional gains, leads to adjusted PAT for the year of about Rs. 290 crore. CY12 Earning Per Share is Rs. 144.

For the first quarter of CY13, Strides Acrolab has published only standalone financials comprising the pharma and biotech business, as Agila’s specialities business is to be divested (subject to approvals). For Q1CY13, the pharma business reported revenue of Rs. 193 crore, up 45% YoY from Rs. 133 crore YoY.

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Company Valuations:

Earnings before Interest Tax Depreciation Amortization for Q1CY13 stood at Rs. 49 crore versus Rs. 18 crore YoY with margin strengthening to 27%, while in Q1CY12 Company reported net loss of Rs 28 crore, this year it has clocked net profit of Rs. 32 crore. This sharp turnaround shows the potential in the pharmacy business, on which the management bandwidth will be deployed post divestment of the specialties business.  We Bet to Grab Share in Range of 770-750 for Target of Rs. 920 in Time Period of 6-9 Months.

Nse Symbol: STAR
BSE Symbol: STRIDES & 532531