Emkay's research report on Aurobindo Pharma
Aurobindo Pharma overall results in line with estimates with revenues at Rs 33.2bn (estimate Rs 32bn), EBITDA at Rs 7.2bn (est. Rs 6.9bn) and PAT at Rs 4.6bn (est. Rs 4.3bn)
Multiple earnings levers playing out in Q1 no’s with US generics and ARVs recording healthy revenue growth
See potential for strong operating leverage given the huge US generic pipeline including higher margin injectable and Auro’s well entrenched position in API’s
Retain our BUY rating with TP of Rs845/share (earlier 685/share). Value company at 19xSept17E EPS of Rs45/share (earlier March 2017). Key risk remains large sized M&A by Aurobindo, enhanced regulatory risks
Valuations and risks: We value Aurobindo at PE of 19x Sept 2017e EPS of Rs 45/share. Our derived target price is Rs 845/share. We maintain our BUY stock rating. Striving for growth through M&A is the biggest risk for Aurobindo especially given its size. We believe beyond the next 2-3 years, organic growth would be difficult and therefore M&A would need to be an integral part of the growth strategy. Regulatory risks are becoming more pronounced for the entire Indian pharma sector with FDA inspections more frequent as well as standards applied more stringent, says Emkay Global Financial Services.For all recommendations, click here
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