Buy Strides Arcolab Ltd - Motilal Oswal

STRIDES ARCOLAB: Beneficiary of oncology injectables shortage in the US

Strides Arcolab is likely to benefit from shortage of injectables in the US market (including for oncology), which is reported to be persisting for some time now.

Sterile injectables constitute 46% of the total drug shortages in US. In 2009, 73 drugs out of the list of 157 drugs were steriles.

There are only a few players globally in generic injectable space. Injectables manufacturing facilities are limited as it takes longer to obtain regulatory approvals.

In US, for more than half the injectable generics approved since 2004, only a couple of manufacturers have received ANDA approval.

We believe Strides will benefit from the low competition opportunity as its product pipeline includes drugs which are part of FDA's shortage list.

At CMP of Rs406, the stock trades at 10x CY11E and 8.7x CY12E earnings. Given the expected growth in earnings and improving business fundamentals, we believe the stock will offer impressive returns. Buy with target price of Rs557 (12x CY12 EPS), an upside of 35%.

Source : Equity Bulls

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