Accumulate Aurobindo Pharma; target of Rs 550: Prabhudas Lilladher

Prabhudas Lilladher's research report on Aurobindo Pharma

We cut our FY23-25E EPS est. by 10-17% to factor in lower margins and US sales. Aurobindo Pharma’s (ARBP) performance was weak in H1FY23, given cost headwinds and lower US sales. We believe cost pressures to remain in near term and margin trajectory should improve from H2FY23. However, pick up in US sales hinge on timely niche approvals along with stabilization of pricing pressure in base business. ARBP has multiple growth drivers in place with investments in vaccines, injectables, biosimilars and PLI, which are expected to be reflected from FY24.

Outlook

At CMP, stock is trading at 11x FY24E P/E. We recommend ‘Accumulate’ with revised TP of Rs550 (Rs635 earlier) based on 12x FY24E earnings.