Angel Broking neutral on Aurobindo Pharma

Angel Broking's report on Aurobindo Pharma

For 3QFY2015, Aurobindo Pharmaceuticals (APL) announced better-thanexpected numbers on the sales and net profit fronts, while the OPM came just in line with our expectations. Sales came in higher than expected, registering a growth of 47.2% yoy to Rs 3,143cr (V/s an expected Rs 2,800cr and V/s Rs 2,136cr in 3QFY2014). On the operating front, the OPM came in at 18.7% (V/s an expected 19.0% and V/s 29.9% in 3QFY2014), a yoy dip of ~10.9%. In spite of a dip in margins, a higher other income (Rs 60cr V/s Rs 9cr in 3QFY2014) aided the adj. net profit to come in at Rs 399cr (V/s an expected) Rs 291cr and V/s Rs 416cr in 3QFY2014), a yoy dip of 4.1%.

Sales for the quarter came in higher than expected, registering a growth of 47.2% yoy to Rs 3,143cr (V/s an expected Rs 2,800cr and V/s Rs 2,136cr in 3QFY2014). The sales growth during the period was led by formulations, which grew by 76.2% yoy (driven by the US which grew by 29% yoy), antiretroviral (ARV) which grew by 51.5% yoy, and EU which grew by 470.9% yoy. API sales dipped by 9.4% yoy owing to the underperformance of the SSP segment (which dipped by 20.4% yoy), and Non-Betalactum (which dipped by 17.4% yoy). Cephs on the other hand posted a growth of 13.7% yoy. On the operating front, the OPM came in at 18.7% (V/s an expected 19.0% and V/s 29.9% in 3QFY2014), a yoy dip of ~10.9%. In spite of a dip in margins, a higher other income (Rs 60cr V/s Rs 9cr in 3QFY2014) aided the net profit to come in at Rs 399cr (V/s an expected Rs 291cr and V/s Rs 416cr in 3QFY2014), still a yoy dip of 4.1%.

Outlook and valuation: "We estimate the company’s net sales to log a 32.2% CAGR over FY2014–16E to Rs 14,054cr on back of supply agreements in the US and ARV formulation contracts, which will be supplemented through the recent acquisitions of the Western European formulation businesses of Actavis and US’s Natrol. The acquisitions have also led APL to become a >~US$2bn sales company, with more than 85% of sales being accounted by formulations. We recommend a Neutral on the stock", says Angel Broking research report.

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