Strides Shasun Ltd's Q4FY18 consolidated net profit declines 77.16% yoy to Rs22.50cr : Misses Estimates

The company’s consolidated revenue stood at Rs664.15cr, down 1.92% yoy and 11.33% qoq.

May 18, 2018 12:05 IST India Infoline Research Team

Strides Shasun Ltd Q4FY18

Consolidated Results Q4FY18: (Rs. in cr)

Q4FY18 YoY (%)
Revenue 664.15 [1.9]
EBITDA 86.52 [33.3]
EBITDA Margin (%) 13 [611]
Net Profit (adjusted) 22.50 [77.2]
***EBITDA margin change is bps


Reco. Price


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Strides Shasun has reported 2% yoy decline in the revenue to Rs664.2cr. EBITDA declined by 33% yoy to Rs86.5cr in Q4FY18. EBITDA margins were at 13% in Q4FY18 vs 16.4% in Q3FY18 and 19.1% in Q4FY17. Adjusted PAT declined by 77% yoy to Rs22.5cr in Q4FY18.
This was the first full quarter of Strides Shasun after it sold its India business.
  • Australia business revenue were at Rs270.9cr in Q4FY18. Compnay has said that the business is slowly ramping up. Company has recently announced that it will merge its Australia business with Apotex, which will be EPS accretive from year one.
  • The US business has seen a 50% decline on qoq basis, which is a cause of concern. In Q3FY18, the US business had revenue of $42mn, which has declined to $21mn in Q4FY18.
  • Company has said that it has not achieved expected market share in two products, which are launched through partnership and also the potassium citrate and Omega 3 market opportunity has shrunk by 50% due to the competition.
  • Oseltamivir (Tamiflu) approval has now delayed and company expects this to be in July 2018.
  • In the other regulated markets, the company's performance has improved.
  • The institutional business continues to remain under pressure due to the decline in the anti-malarial drugs funding.
  • Arun Kumar will be Chairman and MD of the company and Shashank Sinha will lead the global operations.
Concall highlights
  • As per the management, the strategy has continued to build momentum in business but execution was not up to the expectations in FY18.
  • The corporate actions have now completed and the focus is on building the company as diversified B2C pharma player.
  • Management has said that it is taking course correcting strategy, which should not take more time and will be back within 3-4 quarters.
  • Company has said Q4FY18 was one-off quarter due to double whammy in the US business and its performance will improve from H2FY19E and will stay focussed on US and niche products
  • Australia operations has been a success as per the management and that Australian business in FY18 has seen ~300% bps margin expansion due to supply chain efficiencies. 
  • Sequential growth in Australia has been above the industry growth and had exited the quarter at A$50mn rate. It expects FY19E to see low teen growth in Australian business. Company had launched 29 products in FY18 and expects more launches in FY19E. Expecting lot of synergy in the Australia due to the merger of Arrow with Apotex.
  • In the US, company has 67% business with partners which suffered during the quarter, especially in two products, gLovaza and Potassium citrate which did not meet the goal.
  • In gLovaza, Teva aggressively priced their products which led to a severe drop in revenues and market share which led Strides to stop the product shipments to its partner Par due to the losses. 
  • Potassium citrate also faced same issues, as an authorized generic maker and an Indian company aggressively priced the drug, which led to a significant drop in the revenue. This led in significant loss in the opportunity, company is now sitting on inventory, which would exhaust in four quarters.
  • Company had received a Target Action Date (TAD) for gTamiflu however on the TAD date, API received USFDA queries which have now to be addressed, company has said that July-2018 to be new action date.
  • Due to the partnership failure, company has said that it will reduce the dependence of partnerships in future and will build its own front, which currently contribute ~33% of the total US revenue.
  • It expects FY2020E revenue to be fully front ended expect one legacy product.
  • Company has said that it has received USFDA approval for Ibuprofen softgel, which currently is facing acute shortage in US. Company expects to commercialize this drug in H2FY19E.
  • Strides Shasun’s ARV biz has become negligible due the drying up of the funding situation and API prices have also increased but sale prices have not raised. Management also said that Solara does not ARV APIs.
  • Company has lined up ~15 launches in FY19E of which 2/3 are partnered on which company has control in decision making.
  • Its current debt stood at Rs1,704cr and expects Rs38cr/quarter interest costs going ahead. 

Technical View:
Strides Shasun Ltd is currently trading at Rs399.75, down by 103.2 points or 20.52% from its previous closing of Rs502.95 on the BSE.
The scrip opened at Rs. 507.10 and has touched a high and low of Rs. 507.10 and Rs. 378.70 respectively. So far 96,21,637 (NSE+BSE) shares were traded on the counter. The stock is currently trading above its 200 DMA.

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