Shilpa Medi­care Shares may Break Free on Com­pli­ance Gain

The Economic Times - - Smart -

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%.

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