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ICICI Securities Report
Strides Pharma Science Ltd.'s Q1 FY24 earnings exhibited a healthy beat on margin front. Improved product mix, cost-optimisation initiatives and freight costs led to expansions in gross margin (+880 basis points YoY) and Ebitda margin (+1,250 basis points).
Strides Pharma aspires to improve from these levels going ahead. Adjusted for divested businesses, revenue recorded a healthy 11% YoY growth. U.S. business saw a sequential decline (9.1%) on a higher seasonal base, but is expected to ramp up in coming quarters, driven by healthy new product launches.
Management expects to record $240-250 million in FY24. We cut our FY24E/FY25E earnings per share estimates by ~1%/5%, respectively.
The recent run up in the stock price has made valuations pricey. We downgrade the stock to 'Hold' (from 'Add') with a revised target price of Rs 460 (earlier: Rs 390) based on 14 times FY25E EPS.
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