Buy Aurobindo Pharma; target of Rs 935: Religare

Religare's reserach report on Aurobindo PharmaARBP has received the USFDA’s nod for gSolu-Medrol (methylprednisolone sodium succinate injection; market size: US$ 102mn as per MAT Oct’15) and gImodium A-D tablets (Loperamide Hcl; market size: US$ 9.7mn). We believe the gMedrol launch can be a substantive one, adding US$ 15mn-20mn p.a. to revenues. With 33 approvals in FY16 YTD (including 2 tentatives), ARBP continues to defy the general industry trend of slower approvals. The stock is our top mid-cap pick – maintain BUY with a Sep’16 TP of Rs 935.On a high base, we expect the US business to grow at a 22.7% CAGR over FY15-FY18 led by (a) a rising share of complex generics in the product mix, (b) a large ANDA pipeline (168 pending ANDAs), (c) strong growth in injectables/controlled substances, and (d) OTC penetration through the Natrol acquisition. Favourable market dynamics in some of the recent approvals can lead to healthy growth upside in our estimates.

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