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Centrum Broking
Aurobindo Pharma (Buy)
CMP: ₹790.85
Target: ₹1,270
Aurobindo Pharma is engaged in producing oral and injectable generic formulations and active pharmaceutical ingredients (APIs).
We maintain our ‘Buy’ rating on Aurobindo Pharma (APL) and revise the target price to ₹1,270 (earlier ₹1,010) based on 18x March 2020E EPS of ₹70.4. APL has agreed to acquire the dermatology and oral solid business of Sandoz — a division of Novartis AG, Switzerland and three manufacturing sites in the US for $900 million (₹6,300 crore). This would make APL the second-largest player in dermatology and the second-largest generic player by prescriptions in the US. The deal also includes over 300 products, pending ANDAs, in-licensed products and FTF products, thus making APL a leading player in the US. APL is among our top picks in the pharma sector.
Risks: Key risks to our assumptions include slower growth in the US business and regulatory risks for its manufacturing facilities.
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