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Shasun Chemicals & Drugs Ltd.
Wednesday, June 6, 2007
Turnaround of Rhodia
Shasun had acquired the business and assets of UK based Rhodia Pharma through its subsidiary Shasun Pharma Solutions Ltd. With this acquisition, Shasun notched up full year revenue of 41.4 m GBP which considered release of the negative goodwill of 6.48 m GBP. The break even of the business will be reached at the level of 49m GBP according to the management. It has given a guidance of 25% growth in the revenues, which was revised from its earlier guidance of 15%. Therefore, SPSL is expected to do a business of around 52.5m GBP in FY08. A goodwill of around 1.5m GBP is yet to be released, half of which, i.e.0.75m GBP would be consumed in current fiscal year which would result in minor positive EBITDA. Marginal decrease in raw material cost with other costs remaining almost unchanged will further help EBITDA margin to improve.
Synergies in acquisition
With Rhodia acquisition, SPSL has got 19 commercial products in its portfolio while 17 molecules are undergoing Phase II and III clinical trials, which will be launched by its partners. Shasun expects to launch one molecule in Phase III clinical trials by September 2008 while another 2-3 molecules will be commercialized by FY10. Shasun will also be having an advantage of using patented technologies of Rhodia like HKR, ABF and trifluoromethylation which it has been implementing in operations for the last 6-7 months which will further help in improving the profitability.
Product and Region Wise Performance
Shasun’s CRAMS operations increased 9 folds from Rs.375m last year to Rs.3.4bn in FY07. Its flagship product, ibuprofen registered sales of Rs.2.2bn which is up by 28% YoY which will be growing by 10% in FY08. However, nizatidine will see its sales decreasing due to its 5 year contract with Eli Lilly ended in March 2007. Its domestic operations contribute around 33% to the revenue while US is the next biggest market with a contribution of 29%.
Valuation
Q4FY07 revenue of Rs.1.1bn grew by 11% YoY. EBITDA of Rs.201m decreased by 14% YoY at Rs.202m due to increased material cost and other expenses. PAT at Rs.143m grew by 9% YoY. The stock is currently trading 10x FY08E EPS of
Rs.12.2.
Shasun had acquired the business and assets of UK based Rhodia Pharma through its subsidiary Shasun Pharma Solutions Ltd. With this acquisition, Shasun notched up full year revenue of 41.4 m GBP which considered release of the negative goodwill of 6.48 m GBP. The break even of the business will be reached at the level of 49m GBP according to the management. It has given a guidance of 25% growth in the revenues, which was revised from its earlier guidance of 15%. Therefore, SPSL is expected to do a business of around 52.5m GBP in FY08. A goodwill of around 1.5m GBP is yet to be released, half of which, i.e.0.75m GBP would be consumed in current fiscal year which would result in minor positive EBITDA. Marginal decrease in raw material cost with other costs remaining almost unchanged will further help EBITDA margin to improve.
Synergies in acquisition
With Rhodia acquisition, SPSL has got 19 commercial products in its portfolio while 17 molecules are undergoing Phase II and III clinical trials, which will be launched by its partners. Shasun expects to launch one molecule in Phase III clinical trials by September 2008 while another 2-3 molecules will be commercialized by FY10. Shasun will also be having an advantage of using patented technologies of Rhodia like HKR, ABF and trifluoromethylation which it has been implementing in operations for the last 6-7 months which will further help in improving the profitability.
Product and Region Wise Performance
Shasun’s CRAMS operations increased 9 folds from Rs.375m last year to Rs.3.4bn in FY07. Its flagship product, ibuprofen registered sales of Rs.2.2bn which is up by 28% YoY which will be growing by 10% in FY08. However, nizatidine will see its sales decreasing due to its 5 year contract with Eli Lilly ended in March 2007. Its domestic operations contribute around 33% to the revenue while US is the next biggest market with a contribution of 29%.
Valuation
Q4FY07 revenue of Rs.1.1bn grew by 11% YoY. EBITDA of Rs.201m decreased by 14% YoY at Rs.202m due to increased material cost and other expenses. PAT at Rs.143m grew by 9% YoY. The stock is currently trading 10x FY08E EPS of
Rs.12.2.
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Investment in equity shares has its own risks. Sincere efforts have been made to present the right investment perspective.The information contained herein is based on analysis and up on sources that we consider reliable. I, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and I am not responsible for any loss incurred based upon it.& take no responsibility whatsoever for any financial profits or loss which may arise from the recommendations given in this blog.
