Aurobindo Pharma Ltd. share price target

With Pharma industry facing a lot of head winds and price erosion hitting the margins of many US focused pharma companies, Aurobindo Pharma (APL) is able to maintain its EBITDA margins in the range of 22-25% from FY15-FY17....

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We expect revenues to grow at 10% CAGR over FY17-20E driven by new product launches mainly in complex generics, volume growth in existing products and ramp-up in Europe business. We reduce our valuation multiple to 13.5x to factor continued pricing pressure in the US generics business and issue of Form 483 by USFDA to its Hyderabad unit. However, strong pipeline, diversified product-mix and key launches in injectables makes it an attractive bet. Rolling over estimates to FY20E, our revised target price stands at Rs 644....

US Sales (44% of sales) grew 9% YoY on new launches, but declined 9% QoQ (given increasing competition in gRenvela). Sales growth across other key verticals was strong (EU: up 37% YoY, RoW: up 33% YoY) which led to 15% YoY growth in EBITDA.

Maintain BUY rating, with a revised TP of Rs 805 (16x Dec-19E). Aurobindo Pharma (ARBP) delivered a top-line of 43.3bn in 3QFY18, up 11% YoY and in-line with estimates. The US business delivered 9% growth YoY, and the European and RoW markets continued their momentum, recording 36% growth YoY. The EBITDA margin was up 74bps at 23.7%, primarily driven by a business mix led gross margin improvement. PAT came in at Rs 5.95bn up 3% YoY, impacted by a Rs 664mn charge on the deferred tax assets after the changing tax laws in the US.

Revenues grew 11% YoY to |4336 crore (I-direct estimate: |4219 crore) mainly due to 37% growth in Europe to |1172 crore (I-direct estimate: |1122 crore) led by acquisition of generis in Portugal. The US revenues grew 9% to |1910 crore (I-direct estimate: |1848 crore) EBITDA margins grew 74 bps YoY to 23.7% (I-direct estimates: 22.7%) due to higher gross margins (58.1% vs 56.2% in Q3FY17). EBITDA increased 15% to |1026 crore (I-direct estimate: |957 crore) Net profit increased 2.8% YoY to | 595 crore (I-direct estimates: |...

For 2QFY2018, Aurobindo Pharma (APL) posted numbers slightly higher than expected sales, OPM and net profit fronts. On sales front, the company posted sales of `4,354cr (v/s. `4,200cr expected) v/s. `3,715cr in 2QFY2017, a yoy growth of 17.3%. On the operating front, the EBITDA margin was almost flat at 23.8% (v/s. 25.4% expected) v/s. 23..

Aurobindos revenues grew 20.1% q-o-q and 17.5% y-o-y to Rs 44,462 mn in 2Q FY18 exceeding our expectations. Revenue growth was driven by 9.9% y-o-y growth in US and 38.6% y-o-y growth in Europe during the quarter. API business also revived during the quarter and grew at a modest 5.0% y-o-y. Adjusted EBITDA increased 30.6% q-o-q and 20.3% y-o-y to Rs 11,276 mn during 2Q FY18. Adjusted EBITDA margin increased 202 bps q-o-q and 58 bps y-o-y to 25.4% in 2Q FY18, exceeding our expectations, mainly due to lower than expected Cost of Goods Sold as percentage of revenues during the quarter....

With major near-term launches priced in, we downgrade our rating to NEUTRAL, with a revised TP of Rs 800 (16x Sep-19E). The launch of gRenvela where Aurobindo Pharma (ARBP) was the first to market, provided a significant boost in 2QFY18. Revenue grew 18% YoY to Rs 43.9bn, EBITDA margin was up 57bps at 25.4%, and PAT jumped 28% YoY to Rs 7.8bn. However, multiple generic players have since launched gRenvela tablets, leading to substantial price erosion and lower market share for ARBP. We expect US sales to taper down for the next few quarters, as visibility on similar lucrative launches is low.

Aurobindo Pharma Ltd Q2FY18 results comment Revenue increased by 20.25% to Rs. 4354.18 Cr in Q2FY18 when compared to the previous quarter. Also, it increased by 17.25.