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HDFC Securities
Aurobindo
Pharma (Buy)
CMP: ₹763.35
Target: ₹820-865
Aurobindo Pharma is one of the few large generic players to post growth in its US business, whereas similar-sized portfolios have witnessed significant erosion. With near-term opportunities such as Toprol XL, Prevacid ODT, Welchol, and several injectable products, we believe APL could continue to maintain its growth momentum.
The company’s diversified portfolio has enabled it withstand the pressure of price erosion and maintain growth. APL has a strong product pipeline that has a massive opportunity size in the EU Formulations business owing to products going off-patent.
With the recent acquisition of certain products from Sandoz, APL will be able to leverage its already vertically integrated and highly efficient manufacturing base, to enhance its position of the acquired portfolio in the US. It will also be able to take advantage of its existing operating infrastructure in the US. The earlier Apotex acquisition would open newer markets for APL, and also increase penetration in existing markets.
We feel investors could buy the stock now and add on dips to the ₹680-685 band (15x FY20E EPS) for sequential targets of ₹820 (18x FY20E EPS) and ₹865 (19x FY20E EPS).
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