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Buy Aurobindo Pharma; target of Rs 1070: Centrum Research

June 13
16:25 2018

Centrum Research’s research report on Aurobindo Pharma

We maintain our Buy rating on Aurobindo Pharma (APL) and revise TP to Rs1,070 (earlier Rs1,170) based on 18x March’20E EPS of Rs59.3. The company’s Q4FY18 revenues and net profit were in-line with our expectations. However, EBIDTA margin was below expectation. APL’s sales grew 11% YoY, margin improved 10bps to 19.9%, and net profit declined by 1% YoY. APL’s two manufacturing units IV and XII have been cleared and received EIR from US FDA. Its specialised segments such as injectables, penam, microspheres, hormones, oncology, vaccines, neutraceutical, depot injections and peptides would improve margins due to complexity in the manufacturing. APL has developed a robust pipeline of 478 ANDAs for the US market through differentiated products. APL is among our top picks in the pharma sector.

Outlook

We maintain our Buy rating on the scrip, with a TP of Rs1,070 based on 18x March’20E EPS of Rs59.3, and with an upside of 99.9% from CMP.  We have revised our FY19E and FY20E EPS downwards by 14% and 8% respectively. APL is among our top picks in the pharma sector. Key risks to our assumptions include slower growth in the US business and regulatory risks for its manufacturing facilities.

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