Buy Aurobindo Pharma; target of Rs 466: Ventura

Ventura's research report on Aurobindo Pharma

"Aurobindo Pharma, at the CMP of Rs 377, the stock is trading at 12.5x and 9.7x its estimated earnings for FY15E & FY16E, respectively, representing a potential upside of ~24 percent over a period of 24 months. Post the previous issues regards the USFDA import alert (FY12) ARBPL has seen a strong rebound in its performance led by the robust growth (27 percent YoY) of its generic formulations business in FY13. Further, a slew of ANDA approvals over in the recent period have helped improve revenue visibility over the medium term."

"Given the strong product pipeline (+100 general injectables by FY16E, ~4 penems by FY15, +20 controlled substances in FY15, 25 oncology products and 10 hormonal product by FY17) targeting the largest generic market (US), ARBPL will be a key beneficiary of the increased generic opportunities. Additionally, the upcoming patent expiries, along with its maiden foray into the differentiated products are further expected to drive growth of its US business. EU/RoW markets are also expected to benefit from the increased penetration into existing geographies (South Africa, UK, Netherlands, Australia, Spain, Portugal and Germany). On the API side, increased focus towards the high value non-betalactums in advanced markets (EU, US and Japan) is expected to add to the profitability of the API business."

"We expect ARBPL’s revenues and earnings to grow at a CAGR of 24.2 percent and 57.2 percent to Rs 11,214 crore and Rs 1,131 crore over the forecasted period of FY13-16E. Further, timely approvals for ready to market products can be a game changer for the company and further accelerate the pace of growth. On the back of improving fundamentals, the cash flows are also expected to look up and should help pare the debt and reduce debt to equity to 0.8x by FY16E."

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