Shilpa Medicare Shares may Break Free on Compliance Gain
Mumbai: Shilpa Medicare, a smallsized phamra company, rallied 18% on Wednesday to break out from its 100-to 200-day moving average after it received good manufacturing practice (GMP) compliance certificate for two active pharmaceutical ingredient (API) sites in Kar nataka f rom Phar maceuticals and Medical Devices Agency (PMDA), Japan.
This development comes as a big relief to the company, especially at a time when many of the bigger Indian pharma companies are embroiled in regulatory issues, said analysts.
“Given the scenario, where business has been adversely impacted by regulatory hurdles, a letter of compliance is a major positive for Shilpa Medicare,” said Daljit Kohli, head of research, IndiaNivesh Securities.
“We expect FY18 to have considerable business from API as well as formulation facility. We introduce 2017-18 estimates and roll forward our valuation to 18 times 2018 estimated earnings per share of ₹ 29,” he said.
Shares of Shilpa Medicare, which manufactures and sells bulk drugs and intermediates in India, especially oncology products, have remained flat for the past four months with just 3% gain since the beginning of the year. Early this year, some of the analysts cut their EPS estimate for FY16 and FY17 by almost 20% to factor in the delay in getting these regulatory clearances. The company reported an uptrend in YoY growth in sales for four consecutive quarters even after easing of the base effect. For the December 2015 quarter, it reported a 28.3% YoY jump in net sales to ₹ 198 crore led by a healthy growth in all the major segments — onco API, non-onco API as well as CRAMS segment. Adjusted profits grew 47% YoY to ₹ 24.9 crore.
Shilpa Medicare has recorded good operating margins of over 20%.