Strides Pharma Science (STAR) Q1 25/26 earnings summary

Executive summary

• Achieved strong quarterly performance with disciplined focus on growth, profitability, and cash flow, with revenue up 6.2% year-over-year and operational PAT rising 80.6% year-over-year to the highest-ever quarterly PAT and operational EPS of 12.4.

• Completed a major demerger of the CDMO and Soft Gelatin business, recognizing a one-time gain of Rs. 31,881 million as discontinued operations.

• Maintained a calibrated approach to growth, emphasizing operational efficiency, R&D investment, and sustainable profitability across all business segments.

• The business is now reported as a single "Pharmaceutical" segment post-demerger.

Financial highlights

• Revenue for the quarter was INR 11.2 billion (INR 11,197 million), up 6.2% year-over-year, with gross margin expanding by 300 basis points to 60.3%.

• EBITDA margin stood at 19.5%, with EBITDA growing 14.8% year-on-year; operational EPS was INR 12.4, up 81% year-on-year.

• Highest ever quarterly operating PAT at INR 1,140 million, with EBITDA to PAT conversion at 52%; reported PAT was INR 1,055.93 million.

• Operational cash flow was INR 1,177 million, generating free cash of INR 26 crore, contributing to debt reduction; net debt reduced to INR 14,958 million.

• Credit rating upgraded to "CARE A Positive" in Q1FY26.

Outlook and guidance

• Long-term U.S. business outlook maintained at $400 million by FY2028, with growth expected to accelerate from Q2 onwards and relaunches from dormant ANDAs planned.

• Beyond Generics strategy aims for higher per-product value and new R&D domains, with several filings and commercial launches expected in the coming year.

• EBITDA margins are expected to remain close to the current 19.5% range, and gross margins are targeted to stay between 58% and 60%.

• Other Regulated Markets to focus on portfolio expansion and new customer acquisitions for growth.

• Continued focus on operating cashflow generation and debt reduction while funding capex from internal accruals.