Shilpa Medicare Research Report By IndiaNivesh (Feb 2016)

Shilpa Medicare (SLPA IN) adjusted PAT was better‐than‐estimates led by better than expected y‐y sales growth for the quarter. On Y‐y basis, sales growth momentum is maintained with growth in onco‐API, non‐Onco API as well as
CRAMS segment. Recently, SLPA received letter of compliance from USFDA for its Raichur‐API facility. This event opens opportunity for business from US market. Given the scenario, where, business has been adversely impacted by regulatory hurdle for other pharma companies, letter of compliance is major positive for SLPA. Hence, we raise our PE multiple for SLPA from 16x to 18x. We now await clearance of regulatory hurdle at its Jadcherla formulation facility. We cut our EPS estimate for FY16E and FY17E by 20% and 19% to factor delay in getting regulatory clearance for its Raichur facility. We expect FY18 to have considerable business from API as well as formulation facility. We introduce FY18E estimates and roll forward our valuation to 18x FY18E EPS of Rs29. Accordingly, we raise our price target to Rs517 from Rs345 earlier. We upgrade SLPA from HOLD to BUY, based on potential upside of 28% from current levels.

Shilpa-Medicare-IndiaNivesh-Feb-16