Buy Aurobindo Pharma; target Rs 166: Angel Broking

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Buy Aurobindo Pharma; target Rs 166: Angel Broking

Angel Broking is bullish on Aurobindo Pharma (APL) and has recommended buy rating on the stock with a target price of Rs 166 in its November 16, 2011 research report.

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Angel Broking is bullish on Aurobindo Pharma (APL) and has recommended buy rating on the stock with a target price of Rs 166 in its November 16, 2011 research report.

"Aurobindo Pharma (APL) posted lower-than-expected results on the top-line, operating and PAT fronts (for 2QFY2012). Lower growth in the company's top line was on account of lower-than-expected growth in the formulation segment. Net sales grew modestly by 3.1% yoy to Rs 1,075cr, mainly on the back of pressure on the formulation segment. The US market and ARV segment reported lower-than-expected growth. The US market declined by 4.1% yoy, while the ARV segment grew only by 1.9% yoy. The API segment, on the other hand, grew by 8.5% yoy. Gross margin came in at 44.3%, impacted by higher raw-material costs. OPM declined to 10.7%, lower than our estimate of 16.7%, impacted by lower gross margin and increased employee and other expenses. Adjusted net profit came in at Rs 42cr during the quarter."

"Commencement of operations at the Hyderabad SEZ and incremental contribution from the Pfizer deal would boost APL's earnings with better growth visibility going forward. We estimate net sales to log a 12.7% CAGR to Rs 5,243cr over FY2011-13E on the back of supply agreements and the US and ARV formulation contracts. Even after factoring in lower profitability going forward, the stock trades at attractive valuations. Hence, even after the downtrend, we maintain Buy on the stock with a revised price target of Rs 166," says Angel Broking research report.

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To read the full report click on the attachment