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Last Updated : Jun 02, 2016 05:11 PM IST | Source: Moneycontrol.com

Strong pipeline, Europe profits, US to drive Aurobindo growth

BofA-ML has a buy call on the stock and a price target of Rs 1,015. Earlier, the brokerage had a price target of Rs 1,050 and reduction is mainly on account of higher R&D expenses.

 
 
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Profitability in the European business, a healthy pipeline and balance sheet as well as a strong injectable business in the US will be main growth drivers for Aurobindo Pharma (ARBP), says a report by Bank of America Merrill Lynch.

The European business of the company is expected to improve in coming years on back of 'increasing transfer of manufacturing to Indian facilities,’ says Bank of America Merrill Lynch (BofA-ML). As per the management guidance, the company is likely to use cash to deleverage its balance sheet in FY18, adds the report.

The company reported robust fourth quarter numbers with a 18.49 percent rise in revenues to Rs 3,747 crore and the margins expanded by 280 basis points to 23.55 percent in the fourth quarter. The net profit also rose 39 percent to Rs 560 crore year-on-year.

Post the numbers, BofA-ML has a buy call on the stock and a price target of Rs 1,015 for the stock. Earlier, the brokerage had a price target of Rs 1,050 and reduction is mainly on account of higher R&D expenses.

IIFL, in its report, has listed key takeaways from Aurobindo’s conference call post the Q4 numbers.

The company plans to utilize Rs 1,200 crore as capital expenditure in FY17 and Rs 500 crore in FY18. Research & Development is expected to be around 4-5 percent, a slight increase from FY16’s 3.4 percent.

Aurobindo has planned for major debt reduction in FY18 when the capital expenditure slides down. Also, there seems to be no plans to raise capital and if at all, it happens, then it will be for a ‘strategic purpose and not regular funding’.

The company will be launching close to 30-40 new products in FY17 despite Q4 launches having a negligible impact on sales, mentions the report. Of this, key 7 products will be launched in Q1 itself including Celecoxib, which is an anti-arthritis drug.

The company’s US pipeline has 251 approved abbreviated new drug application (ANDAs) and 247 pending approvals.
First Published on Jun 2, 2016 05:11 pm
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