Accumulate Aurobindo Pharma; target of Rs 907: KR Choksey

KR Choksey's research report on Aurobindo Pharma

In Q1FY24, Aurobindo reported a revenue of INR 68,505 Mn (9.9% YoY and +5.8% QoQ) driven by healthy growth in US and European market. During the quarter, EBITDA grew by 19.3% YoY and 14.9% QoQ to INR 11,514 Mn. The margins expanded by 134 bps YoY to report to 16.8%(+132 bps QoQ), the improvement in the margin is driven by lower other expenses and employee costs; partially offset by higher R&D expenses. The net profit for the quarter stood at INR 5,707 Mn (9.6% YoY and +12.7% QoQ). The net profit margins contracted by merely 2 bps YoY( +51bps QoQ) .EPS during the quarter stood at INR 9.7 against INR 8.6 in Q4FY23 and INR 8.9 in Q1FY23.

Outlook

We expect Aurobindo’s revenue and adj. PAT to grow at 9.8% and 35.6% CAGR, respectively, over FY23-FY25E. Since our last update, current market price crossed our target price. The stock is currently trading at 17.1x/13.8x of our estimated FY24E/FY25E EPS. We assign a P/E multiple of 15.0x on FY25E EPS of INR 60.5 to arrive at a TP of INR 907 (earlier TP INR 665) and revised the recommendation from ‘Hold’ to ‘Accumulate’, as the upside potential is 8.5% from its CMP of INR 836.

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