Target: ₹731

CMP: ₹655

Strides Pharma Science Ltd. (STAR) is an R&D focussed, vertically integrated pharmaceutical company with an experienced management team having presence across multiple therapeutic segments.

Strides reported its H1FY24 consolidated revenue at ₹1,929 crore (5 per cent y-o-y) with continued momentum in both the US and regulated markets. The US markets witnessed a 17.1 per cent y-o-y growth in H1-FY24.

Cost control measures and softening freight costs have resulted in an EBITDA expansion by 846 bps in H1FY24 to ₹320 crore. Strides plans to divest its Singapore facility to a Rxlinet Biohub and the Stellis plant to Syngene, thereby reduce debt.

Driven by effective debt reduction, cost optimisation, growth in the US business owing to a strong pipeline and redefining CDMO business, we expect healthy traction in the coming quarters.. The outlook for the other regulated markets continues to remain robust, given strong order book visibility. Stelis is likely to benefit from both an improving balance sheet and a promising uptick in revenue. 

However, in light of the recent rise in the prices and growing concerns on higher valuation, we downgrade our rating to “Accumulate” based on 36x FY26E EPS and a target price of ₹731.