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Target: ₹1,113
CMP: ₹1045.25
Aurobindo Pharma reported a good set of numbers in Q3-FY2024, beating our estimates on EBITDA and PAT basis. The company reported a 14 per cent y-o-y rise in total revenue to ₹7,351 crore, led by stronger-than- anticipated growth in all markets like the US (51 per cent of sales).
The healthy product mix resulted in EBITDA growth of 62 per cent y-o-y to ₹15,520 crore and a 610bps increase in EBITDA margin to 20.7 per cent . Healthy operations led to PAT growth of 91 per cent after adjusting for forex to ₹940 crore.
Going forward, the closure of a few lines of its subsidiary Eugia’s Unit- 3 would cost Aurobindo $20 million, followed by a remediation cost of $2-3 million per month. This would impact overall operations. Hence, we are downgrading our EPS estimates by 2 per cent, 7 per cent and 4 per cent in FY2024, FY2025, and FY2026 to ₹53, ₹57.7 and ₹70, respectively. We downgrade the stock to Hold.
Key Risks: Delay in the resolution of USFDA issues and product approvals; change in the regulatory landscape; and negative outcome of key facility inspection by the USFDA can affect earnings prospects.
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