Broker's call: Aurobindo Pharma (Buy)

| Updated on December 11, 2019 Published on December 12, 2019

Geojit Research

Aurobindo Pharma (Buy)

CMP: ₹449.3

Target: ₹492

Aurobindo Pharma Ltd is a leading pharmaceutical company which is vertically integrated with business units comprising of formulations, custom synthesis, peptides, aurozymes, R&D and API (active pharmaceutical ingredient).

Q2FY20 revenue grew 17.9 per cent y-o-y to ₹5,600 crore, marginally beating street estimates, primarily driven by in crore ease in sales of US (+27.3 per cent y-o-y) and Europe (+21.2 per cent y-o-y) formulations.

EBITDA rose by 13.8 per cent y-o-y to ₹1,167 crore partly helped by IND AS implementation although EBITDA margin declined 75 bps y-o-y to 20.8 per cent. Resultantly, adjusted PAT in croree ased by 2.4 per cent y-o-y to ₹653 crore with PAT margin at 11.7 per cent (down 120 bps).

Aurobindo Pharma received 14 observations from USFDA post inspection of its injectable manufacturing facility at Hyderabad in early November.

Though we maintain our ‘buy’ rating on the stock, given strong US sales, near term Sandoz deal closure and new product launches, we reduce the FY21E adj. EPS target multiple to 9x (versus 12x earlier) due to recent observations from USFDA, with revised target price of ₹492.

Published on December 12, 2019
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