Strides Shasun acquisitions provide comfort as risk is low: Credit Suisse

By: | Updated: January 28, 2016 7:22 AM

After exiting its injectable business, Strides has rebuilt itself into a geographically diversified generic company with presence across the US (15% of revenues), Africa (24%), and Australia (18%).

Sensex, Nifty, sensex today, us fed outcomeAfter exiting its injectable business, Strides has rebuilt itself into a geographically diversified generic company with presence across the US (15% of revenues), Africa (24%), and Australia (18%). (Photo: Reuters)

After exiting its injectable business, Strides has rebuilt itself into a geographically diversified generic company with presence across the US (15% of revenues), Africa (24%), and Australia (18%).

The transition phase and geographical expansion are largely over through inexpensive, low-risk acquisitions over the past two years. Focus now is on increasing scale and profitability in existing markets, and we do not expect a large acquisition, but bolt-ons to fill the gaps.

The US and Africa are the key growth drivers. We expect a 30%-plus CAGR over the next three years. In the US, Strides transitioned from a partnership model to having its own front-end, has a few niche products, and strengthened its pipeline through the Shasun acquisition. The company has organically built an enviable Africa business over the past decade and could command a premium valuation.

Lovaza approval and margin improvement. Lovaza approval is expected in FY17, and a potential market share ramp-up in existing products should drive its US business. Margin improvement could be visible over next few quarters.

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