Accumulate Aurobindo Pharma; target of Rs 900: Prabhudas Lilladher

Prabhudas Lilladher's research report on Aurobindo Pharma

Our FY24/25E EPS est. stands increased by 7-12% to factor in higher margins. Aurobindo Pharma’s (ARBP) Q1FY24 EBITDA of Rs11.5bn (up 15% QoQ) with OPM of 16.8% (up 130 bps QoQ) was 8% above our estimate. We expect margin trajectory to further improve. Pick up in US sales hinge on timely niche approvals along with stabilization of pricing pressure in base business. We believe ARBP has multiple growth drivers in place with investments in vaccines, injectables, biosimilars and PLI which are expected to be reflected from FY25.

Outlook

At CMP, stock is trading at 16x FY25E P/E. We value company at 16x FY25E EPS (13x earlier) and assign a TP of Rs900/share (Rs660 earlier). Given a sharp 20% appreciation in stock price in less than one month and limited upside, we cut our rating from BUY to Accumulate.