Strides Pharma Q3 Results Review - Regulated Markets Drive Growth: ICICI Securities

ICICI Securities Report

Strides Pharma Science Ltd.’s Q3 FY23 performance fell short of our revenue expectations, mainly due to negligible sales in the institutional business. Revenues grew 8.9% YoY (down 3.6% QoQ) to Rs 8.7 billion (our estimate: Rs 10 billion). U.S. sales were up 5% QoQ to $63 million (our estimate: $60 million) driven by volume growth and traction in new product launches.

Emerging market revenues fell 73.9% QoQ to $6 million. Institutional business saw negligible revenues during the quarter due to expiry of contracts. Higher U.S. sales contribution and several cost optimisation initiatives drove a 410 bps QoQ Ebitda margin improvement to 13.5% (our estimate: 11.6%).

Strides Pharma has guided toward a gross debt reduction of ~Rs 10 billion in FY23 and a ‘net debt/Ebitda’ ratio of less than three in the near term. Growth momentum in the U.S. business, likely debt reduction and reasonable valuations make the stock attractive.

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