Aurobindo Pharma Q3 preview: Profit may get a boost; outlook on US business key

Revenues are expected to grow ~16 percent YoY to Rs 5,022 crore mainly due to 33 percent growth in the US led by new launches and currency tailwinds. Strong growth in the US could be partly offset by an expected 30 percent decline in the antiretroviral (ARV) business. EBITDA margins are likely to decline 263 bps to 21 percent due to a change in the product mix. Net profit may grow 14 percent YoY to Rs 669 crore due to a lower tax rate (25 percent vs 34 percent in Q3FY18)

Brokerage: Edelweiss | Profit: Rs 665.6 crore

The brokerage expects US sales (USD 325 million) to grow 2 percent QoQ on the launch of gAngiomax and gZythromax, market share gains in ertapenem, and new orders as existing players exit the markets. Expect Europe to remain flat in cc and to be aided by 8 percent EUR appreciation. We expect EBITDA margin to rebound to ~23-24 percent range.

Brokerage: Motilal Oswal | Profit: Rs 640 crore

We expect Aurobindo (ARBP) to post healthy growth of ~10 percent YoY to Rs 4,760 crore in 3QFY19. Growth will be supported by the formulation business (~83 percent of sales).

Europe and rest-of-the-world (RoW) sales are expected to grow 8 percent YoY, while active pharmaceutical ingredient (API) sales are estimated to grow by ~6percent YoY.

Brokerage: Reliance Securities | Profit: Rs 640 crore

Revenue is expected to grow by 10.2 percent YoY led by US business, which further led by recent launches including Ertapenem, the ramp-up in existing products and favourable currency. The EBITDA margin is seen to stabilise at 21.4percent (vs. 21.6percent in 2QFY19) owing to healthy US business.

However, EBITDA margin is likely to contract on YoY basis due to a high base in 3QFY18 (Renvela) and higher raw material cost.

Factors to watch out: Outlook on the US business and new launches; Update on debt repayment; and Outlook on the recent acquisition of part of Sandoz US business.