Motilal Oswal is bullish on Aurobindo Pharma has recommended buy rating on the stock with a target price of Rs 750 in its research report dated August 10, 2018.
Motilal Oswal's research report on Aurobindo Pharma
Aurobindo Pharma's (ARBP) revenue grew ~16% YoY to INR42.5b (est. of INR42b), largely led by growth of 30% YoY in EU (34% of sales), 32% YoY in growth market (7% of sales) and 20% YoY in API (21% of sales). US sales continued the uptrend, with 11.5% YoY growth to INR19b (54% of sales). Gross margin shrank 420bp YoY to 55.1% due to provision related to product recall, a change in product mix and increased raw material prices. EBITDA margin shrank ~450bp YoY (-150bp QoQ) to 18.3% due to gross margin contraction and higher employee cost. EBITDA declined ~7.4% YoY to INR7.8b (est. of INR9.2b). Reported PAT was lower at INR4.5b due to a forex loss of INR682m. Adjusting for the same, PAT would be INR5.2b.
We cut our FY19/FY20 EPS estimates by 9%/7% to INR44.2/INR49.5 to factor in increased raw material prices. We roll our target to 15x 12M forward earnings and arrive at a TP of INR750. We remain positive on ARBP on the back of its strong ANDA pipeline, consistency in compliance and robust growth in EU business. Maintain Buy.
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