Strides Arcolab shares gained over 3 per cent in the morning trade on Thursday after Jefferies, a global investment banking firm, initiated coverage with a ‘buy’ rating with a target price of Rs 1,500 per share.
At 11.14 am, share of Strides Arcolab was up 3.48 per cent at Rs 1,258.10. The scrip opened at Rs 1233.75 and had touched a high and low of Rs 1259.90 and Rs 1219.70, respectively, in trade so far.
The share price of Strides Arcolab closed 1.86 per cent up at Rs 1,238.40 on BSE.
Piyush Nahar and Poornaa Venkatesan, analysts at Jefferies, said, “Organic earnings CAGR of 32 per cent for FY16-18 and sharp ROE improvement should see the stock re-rate from current levels. Management track record in capital allocation and execution gives them comfort on its unique business model and backward integration and product mix will lead to a 320 basis points margin improvement in the next 3 years.”
Oflate, Sun Pharmaceutical & Strides Arcolab announced that they have entered into a definitive agreement related to erstwhile Ranbaxy’s ‘Solus’ and ‘Solus Care’ divisions operating in the central nervous system (CNS) segment in India. The agreement involves transfer of these two marketing divisions, along with employees to Strides for a consideration of Rs 165 crore. As per IMS July 2015 MAT report, all the products of these two divisions together accounted for approximately Rs 92 crore in sales.
At current market price, shares Strides Arcolab were trading at price-to-earnings ratio of 13.10 against industry P/E of 32.49, indicating under valuation of stocks.
For the quarter ended June 2015, the company posted a consolidated net profit of Rs 41.86 crore, up 120.47 per cent, against Rs 18.99 crore in the corresponding quarter a year ago.
(With inputs from Reuters)