Hold Aurobindo Pharma; target of Rs 516: Sharekhan

Sharekhan's research report on Aurobindo Pharma

Aurobindo Pharma Limited (Aurobindo) reported improved performance for the quarter compared with Q2FY2023 on the sales front. However, concerns surrounding cost pressures continued, which resulted in a 6.1% y-o-y decline in EBITDA to Rs. 954.4 crore, while EBITDA margins contracted by 204 bps y-o-y to 14.9%. The company’s injectables revenue share increased sharply though to 28.6% of the U.S. revenue in Q3FY2023 from 22.5% of the U.S. revenue in Q2FY2023 and 24.9% in Q3FY2022. Results on the profitability side missed internal and consensus estimates massively.

Outlook

We believe the company is yet to show steady improvement in its profitability and until then we will retain our Hold rating on it. The company’ shares are trading at 11.9x/10.1x its FY2024E/FY2025E EPS.

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