Buy Aurobindo Pharma; target of Rs 691: HDFC Securities

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26 Aug, 2025 12:21

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HDFC Securities' research report on Aurobindo Pharma

Aurobindo Pharma’s (ARBP) revenue in 1QFY19 came in at Rs 4.6bn, up 16.7%YoY and 5%QoQ, beating our estimates by 8%. This was aided by good double-digit growth in the formulations segment, with US and Europe/RoW growing at 11.5% and 31% YoY respectively. Gross margin dropped to 55% (v/s 59% in 1QFY18) due to one-off inventory provisions and shelf stock adjustment. EBITDA stood at Rs 7.8bn (down 7%YoY) and margin was at 18.4% (down 477bps YoY/152bps QoQ). PAT at Rs 4.6bn was also down 12.1%YoY impacted by forex loss of Rs 682mn. Despite unfavourable business environment in the US when peers have seen precipitous fall in their revenues and profitability over last two years, ARBP’s portfolio has been resilient and maintained the growth momentum. With near term opportunities like Toprol XL, Prevacid ODT, and Welchol, and several injectable products, we believe ARBP can continue to grow at 8% in top-line while earnings growth will be at 15% CAGR over FY18-20E.

Outlook

At CMP, the stock is trading at 16.4x FY19E and 13.2x FY20E, at a sharp discount to peers. Maintain BUY rating, with a revised TP of Rs 691 (16x FY20E).

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