Strides Arcolab - Concall - Motilal Oswal

STRIDES ARCOLAB 4QCY10: EBITDA marginally below est; PAT hit by higher interest and tax; Guides for 25% topline growth

Strides Arcolab's 4QCY10 net sales grew 15.8% YoY to Rs4.56b, EBITDA grew 9%YoY to Rs772m while the company reported loss of Rs30m.

Topline growth was led by specialty segment which reported 2x growth in revenue to Rs2.2b (vs estimate of Rs2.1b) albeit on a small base.

However, Pharma segment reported decline of 16.8%YoY to Rs2.36b due to poor performance in Indian branded business and decline in pharma manufacturing.

EBITDA grew by 9%YoY to Rs772m while EBITDA margins declined by 100bp YoY to 17%. EBITDA margins were better than estimates.

We expect Strides to clock earnings CAGR of 60% over CY09-12, led by ramp-up in revenues from the SI (sterile injectables) segment and core EBITDA margin expansion in line with changing product mix and higher capacity utilization. At CMP of Rs342, the stock trades at 8.3x CY11E and 7.4x CY12E earnings based on our current estimates. We will be revising our estimates post the earnings Concall.

Source : Equity Bulls

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