- Buoyant growth in API to generate robust revenue growth
Buoyant growth in Ibuprofen and derivatives, aided by multi-drug applications, and better safety and efficacy standards, accompanied by strong growth in Gabapentin, SPL has delivered more than 10% CAGR to Rs5.8bn in FY12 (representing 55% of the consolidated revenues). Networth firmly believes that strong revenue momentum in Ibuprofen & derivatives and Gabapentin, along with geographical expansion into newer developed markets, especially US, EU and Japan will enable API division to deliver robust revenue growth.
- CRAMS to drive healthy growth going forward
SPL assumed the inorganic growth route to mark its entry into the global CRAMS arena. Leveraging upon its strong relationships in API supply, skillful manufacturing capabilities and facilities along with regulatory compliance practices, it expanded CRAMS into India. With operating bases both in India and UK, continuous process research and initiatives in non-infringing process development has enabled it to emerge as partner of choice in drug development for MNCs.
- API contract with innovator assures value creation going forward
SPL’s innovative pharma partner – VERTEX Pharma – has developed a new class of medicines (i.e Telaprivir, branded as Incivek/Incivo) for the treatment of Hepatitis C and got final marketing nod from the USFDA on 23rd May 2011. Telaprevir is one of the two specifically targeted antiviral therapeutics for hepatitis C (STAT-C) drug, which were approved as NCE by the USFDA during May 2011 (Other Hepatitis C drug being Merck’s Boceprevir). Shasun’s UK-based subsidiary – Shasun Pharma Solution - holds a long-term API supply pact with Vertex for the above said molecule. Networth believes the Telaprevir API supply to Vertex would drive value growth for Shasun in the next couple of years.
- Facility expansion to cater the demand for formulations
For catering the demand of formulation CRAMS, company has expanded its formulation capacity of Pondicherry plant from 1.4 billion tablets per annum to 5 billion tablets per annum. Company expanded its formulation business mainly to cater the demand of new contracts and fillings own ANDA’s (Abbreviated New Drug Application) for making entry in generic US market. Hence capacity expansion would boost its revenue in future.
- Incremental margins and robust cash flows will allow deleveraging and further capex
Networth expects higher margins to materialize on account of improving operating leverage with robust orders being executed upon augmented capacities. Targeting mid-sized biotech and pharma companies will enable SPL to generate sustainable cash flows over the coming years. They expect these factors to enable the company to amend its Balance Sheet by reducing the leverage. In the current scenario (global and domestic), with interest costs set to soften, the interest burden will only reduce from here on, thereby reducing the pressure on profitability going forward.
Potent portfolio manufactured upon augmented facilities, strong contract development and manufacturing capabilities, and operational efficiency along with skillful debt-management will generate robust cash flows and allow SPL to emerge as a dependable and competitive supplier/partner for global Pharma majors. Hence, Networth advices their clients to accumulate the stock on decline in price.
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- Black Box Warning is weighing on Shasun UK's financial; Sell
- Shasun Pharmaceuticals: Buy at CMP 150
- Shasun Pharma: Buy for a price target of Rs190
- Shasun Pharma: High growth potential
- Shasun Pharma: Dismal performance at operating level
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