Buy Aurobindo; target of Rs 740: HDFC Securities

HDFC Securities' research report on Aurobindo

Aurobindo’s (ARBP) revenue declined 3% YoY to Rs 36bn in 4QFY17, EBITDA was down 17% Rs 7.2bn (margin at 20%), and PAT was down 5% YoY at Rs 5.3bn. The sub-par top-line result was owing to lower sales in the US market (flat YoY).

Outlook

We have also cut our earnings estimates by 7% /11% for FY18E/FY19E resp, considering the rupee appreciation, rising R&D costs and higher than expected base business erosion in the US, which will partially offset the benefits of the complex generics transition. Expect 9% earnings CAGR over FY17-19E. Maintain a BUY rating with a revised TP of Rs 740 (16x FY19E).