Aurobindo Pharma Ltd. share price target

ICICI Securities Ltd | Retail Equity Research Revenues grew 12% YoY to | 3776 crore (I-direct estimate: | 3765 crore) on account of 18% growth in the US to | 1735 crore (I-direct estimate: | 1770 crore). The Europe business grew 6% to | 813 crore (I-direct estimates: | 826 crore) EBITDA margins increased 146 bps YoY to 24.6% (I-direct estimates: 24.0%) mainly on account of an improvement in gross margins. EBITDA grew 19% to | 929 crore (I-direct estimate: | 904 crore)...

Aurobindo Pharma (ARBP) has reported in-line performance in 2QFY17 with its Sales, EBITDA & PAT stood at Rs37.8bn, Rs9.3bn & Rs5.9bn, respectively. Overall revenue grew by 12% yoy mainly driven by the US business (~45% of sales) which rose by 14.5% yoy & 2% qoq to US$260mn (vs. US$255mn in 1QFY17 & US$227mn in 2QFY16) led by new product launches in oral and injectable segments (final approvals: FY16: 49; H1FY17: 28). Despite weak product-mix and lower sales in key products i.e. gAbilify, Eptifibatide and high-margin Oxycodone in US, gross margins rose by 140bps qoq to 56.8%, which led to 100bps rise in EBITDA. Going ahead, we expect...

ARBP’s top line grew 12% YoY to Rs 37bn in 1QFY17, led by 19% growth in US business (45% of revenues). EBITDA margin improved 30bps sequentially to 23.9% (+203bps YoY) with superior business mix. EU operations (27% of revs) benefited from sourcing efficiencies, operating leverage and new products. Reported PAT increased 35%YoY to Rs 5.8bn.

Valuation: ARBP trades at 15.1x FY18E EPS, a yawning 25-30% discount to sector averages. This is understandable, given the purely generic nature of the business mix. With improving profitability and free cash flows, this gap can reduce. Resume coverage with BUY rating and a TP of Rs 925 (18x FY18E EPS).

Top takeaways from Q1FY17 : ARBP’s Q1 earning performance missed our estimates by 3% (but was just in line with street expectations), primarily due to lower than expected US sales caused by delayed launch of approved drugs.Guides for strong double digit growth in its US business in FY17 led by the planned launch of 19 approved oral dosages (with branded size of US$ 6.8bn, including gNexium) and ~8 injectables in next few months.ARBP indicated that its Europe business turned PAT positive in FY16; expects it to improve further with cost optimisation initiatives like site transfer to a low?cost manufacturing base in India.

Valuation: Phillip Capital estimate ARBP to report sales/earnings CAGRs of 13%/20% over FY16?18. In fact,they are positive on ARBP’s firm footing in the US with limited impact of price correction and robust approval flow. They retain their BUY rating with an unchanged TP of Rs 1,000, i.e., 20x FY18 EPS.

For 1QFY2017, the company’s sales came in at `3,664cr V/s `3,900cr expected and V/s `3,664cr in 1QFY2017, a yoy growth of 13.0%, mainly driven by formulations. Formulations (`3,032cr) posted a yoy growth of 15.9% and constituted around 80% of overall sales, while API (`735cr) posted a yoy growth of 1.6%. On the operating front, the EBITDA margin came in at 22.6% V/s 22.8% expected and V/s 20.6% in 1QFY2016. The yoy improvement in the operating margin was on the back of gross margin expansion (55.3% in 1QFY2017 V/s 53.4% in 1QFY2016). Thus, the Adj. net profit came in at `585cr V/s `576cr expected and V/s `472cr in 1QFY2016.

Valuation: They estimate the company’s net sales to log a 15.1% CAGR over FY2016–18E to `18,078cr on back of US formulations, which will be supplemented through the recent acquisitions of the Western European formulation businesses of Actavis and US’ Natrol. The acquisitions have also led Aurobindo Pharma (APL) to become a >US$2bn sales company, with ~80% of sales being accounted by formulations. We recommend a Accumulate rating

Revenues grew 12.9% YoY to | 3725.9 crore (I-direct estimate: | 3804.0 crore) on account of 20.5% growth in the US to | 1703.9 crore (I-direct estimate: | 1727 crore). The Europe business grew 12.1% to | 831.2 crore (I-direct estimates: | 856.7 crore) . EBITDA margins increased 188 bps YoY to 23.9% (I-direct estimate: 23.5%) mainly on account of an improvement in gross margins. Net profit grew 23.8% YoY to | 585.0 crore (I-direct estimates: | 565.9 crore) mainly due to a better operational performance.

Valuation: The management is sounding extremely confident about the margin improvement and debt reduction on the back of an improved product mix (Increasing injectables contribution in the US) and improved operating leverage. They maintain theirr target price of | 1055, based on 22x FY18E EPS of | 48.0.

Aurobindo Pharma's (ARBP) Sales, EBITDA & PAT stood at Rs37.3bn, Rs8.9bn & Rs5.8bn, respectively in 1QFY17. Revenue grew 13% yoy mainly due to US business (~45% of sales) rising by 14% yoy to US$255mn (vs. US$252mn in 4QFY16 & US$225mn in 1QFY16) led by new product launches (final approvals: FY16: 49; 1QFY17: 13). We expect acceleration in earnings and margins backed by new launches from residual approvals. Its injectable sales stood at US$34mn in 1QFY17 vs. US$36mn in 4QFY16. Its EU revenue (22% of sales) rose 12% yoy to Rs8.3bn. ARBP reported positive EBITDA margin for four quarters in a row...

In the last four years, Aurobindo Pharma Limited - AUROPHARMA PAT has grown 10x while its market cap has grown 12x. Post this stupendous performance, the obvious question that stands before us is, How much steam is still left?...ARBP remains one of the top picks with a target price of INR 1,100 (20x FY18E EPS).

Trendlyne has 10 reports on AUROPHARMA updated in the last year from 4 brokers with an average target of Rs 954. Brokers have a rating for AUROPHARMA with 1 price upgrade in past 6 months and 2 price upgrades in past 1 Year.

Aurobindo Pharma (APL)'s results for 4QFY2016 have come in marginally lower than our expectations. Sales grew by 16.9% yoy to Rs3,675cr (vs Rs3,800cr expected), driven by formulations (which grew by 34.6% yoy; constitute ~79.5% of sales). The key geographies in terms of formulations - US, Europe & ROW- and the ARV segment posted a yoy..