Angel Broking neutral on Aurobindo Pharma

Angel Broking's report on Aurobindo Pharma

"For 4QFY2014, Aurobindo Pharmaceuticals (APL) posted better-than-expected numbers on the OPM and net profit fronts. On the sales front, the company posted a growth of 48.5% yoy to Rs 2,306cr. Formulation sales rose by 75.8% to Rs 1,613.5cr (V/s Rs 918cr in 4QFY2013). API sales rose 13.0% yoy to Rs 754.8cr (vs Rs 666.8cr in 4QFY2013). The margin for the quarter expanded to 31.2% V/s an expected 28.8%, and V/s 14.3% in 4QFY2013. This led to an adj. net profit of Rs 511cr V/s an expected Rs 493cr and V/s Rs 110cr in 4QFY2013. The operating margin expanded on back of operating leverage.

On the sales front, the company posted a growth of 48.5% yoy to Rs 2,306cr. Formulation sales rose 75.8% to Rs 1,613.5cr (V/s Rs 918.0cr in 4QFY2013). API sales rose 13.0% yoy to Rs 754.8cr (V/s Rs 666.8cr in 4QFY2013). The margin for the quarter expanded to 31.2% V/s an expected 28.8% and V/s 14.3% in 4QFY2013. This led to an adj. net profit of Rs 511cr V/s an expected Rs 493cr and V/s Rs 110cr in 4QFY2013. The operating margin expanded on back of operating leverage.

Outlook and valuation: We estimate the company’s net sales to log a 29.2% CAGR to Rs 13,409cr over FY2014–16E on the back of supply agreements in the US and antiretroviral (ARV) formulation contracts, which will be supplemented through the recent acquisition of the Western European formulation business of Activas. This has also led APL to become a ~US$2bn sales company, with more than 85% of sales being accounted by formulations. We recommend a Neutral rating on the company on account of rich valuations", says Angel Broking research report.

Read More