Buy Aurobindo Pharma; target of Rs 875: HDFC Securities

HDFC Securities' research report on Aurobindo Pharma

Aurobindo Pharma’s (ARBP) 2QFY19 performance was ahead of our estimates, with revenue at Rs 47.5bn, up 7/12% YoY/QoQ despite a high base of 2QFY18 which includes gRenvela sales. The 11% beat was primarily driven by the US business (~47% of revenue, up 6/18% YoY/QoQ), while all other segments also grew during the quarter. EBITDA came in at Rs 10.3bn, down 8%YoY/ up 32%QoQ with margin at 21.6% (in-line), expanding 326bps QoQ aided by a 188bps improvement in gross margin (now at 57%), as well as operating leverage. PAT at Rs 6.1bn (-22/+34% YoY/QoQ) was impacted by a one-off acquisition cost amounting to Rs 268mn, adjusting for which it stood at Rs 6.4bn.

Outlook

Trading at 14x FY20E EPS, ARBP remains one of the cheapest among its large cap peers. Maintain BUY with a TP of Rs 875 (15x Sep’20E EPS).