Buy Aurobindo Pharma; target of Rs 915: ICICI Direct
ICICI Direct’s research report on Aurobindo Pharma
Aurobindo Pharmaceuticals’ Q3FY19 numbers were higher than Idirect estimates due to higher-than-expected sales in all geographies except the US. Revenues grew 21.5% YoY to Rs 5269.7 crore (I-direct estimate: Rs 5022.3 crore) mainly due to 27.4% YoY growth in the US • EBITDA margins contracted 344 bps YoY to 20.7% (I-direct estimate: 21.0%) mainly due to lower gross margins. EBITDA grew 6.2% to Rs 1089 crore against I-direct estimate of Rs 1055.5 crore • Adjusted net profit grew 25.4% YoY to Rs 737.3 crore (I-direct estimate: Rs 669.1 crore). The delta vis-à-vis EBITDA was due to higher other income and lower tax rate (22.3% vs. 34% in Q3FY18).
Aurobindo possesses one of the best enduring ecosystems among peers (vertically integrated model, lower product concentration) to withstand the volatility in the US generics space. We arrive at our target price of Rs 915 based on 15x FY21E EPS of Rs 61.
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