Accumulate Aurobindo Pharma; target of Rs 756: KR Choksey

KR Choksey's research report on Aurobindo Pharma

Aurobindo reported Revenue de-growth of 5.7% YoY (+1.0% QoQ) to INR 60.02 bn while ex-Natrol the growth was at -1.0% YoY (+1.0% QoQ). The US revenue including Natrol sales declined 13.4% YoY (-7.5% QoQ, 45.7% of revenue). The company expects a recovery in ARV business from Q4FY22E. Adj. Net Profit (adjusted for exceptional items and foreign exchange gains) grew at a strong pace of 646.8% YoY (-20.9% QoQ) to INR 5.50 bn .The company management believes that Q3FY22 is likely bottoming of overall cost inflationary pressures and pricing erosions in the US market. QoQ increase in ARV sales and strong growth in API sales, both YoY and QoQ, in Q3FY22, are conducive to steady revenue growth outlook in the near term. Emphasis on specialty and injectable business are favorable to profitable growth over medium – long term.

Outlook

The stock is trading at 13.4x/11.2x/9.9x its FY22E/FY23E/FY24 EPS. We apply 10.9x multiple on FY24E EPS of INR 69.11 and maintain the Target Price (TP) at INR 756 per share. Since it indicates an upside potential of 10.5% over the CMP, we maintain our “ACCUMULATE” rating on the shares of Aurobindo Pharma.