Buy Aurobindo Pharma; target of Rs 990: ICICIdirect

ICICIdirect's report on Aurobindo PharmaRevenues increased 3.6% YoY to Rs 298.1 crore (in line with I-direct estimate of Rs 303 crore) led by higher occupancy & higher realisation Revenues grew 15.7% YoY to Rs 3333.5 crore (I-direct estimate: Rs 3595 crore) on account of 25.8% growth in the US to Rs 1477.5 crore (I-direct estimate: Rs 1633.5 crore). The Europe business remained flat at Rs 764.3 crore (I-direct estimate: Rs 778.2 crore)EBITDA margins increased 115 bps YoY to 23.3% (I-direct estimate: 22.5%) due to lower employee cost and other expenditure. EBITDA grew 21.7% to Rs 775.6 crore (I-direct estimate: Rs 808.9 crore) Adjusted net profit (ex-forex loss) grew 23.0% YoY to Rs 456.5 crore, (I-direct estimate: Rs 503.8 crore) owing to a better operational performance and lower taxationRobust product basket bodes well for future; maintain BUYAurobindo continues to thrive in the US, backed by a robust product pipeline and niche launches, which, of late, have slowed down because of a slowdown in approvals. However, the filing to final approval gap (196 at present) still bodes well for future US growth. We expect initial margin pressure, on account of Actavis and now Natrol, to ease further on the back of incremental high margin US launches. With the USFDA expected to expedite the approval process (90% of approvals by September 2017) companies like Aurobindo will stand to benefit the most. Our new target price stands at Rs 990, based on 22x FY18E EPS of Rs 44.9, says ICICIdirect research report.For all recommendations, click hereDisclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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