Neutral Aditya Birla Fashion and Retail; target of Rs 235: Motilal Oswal

Motilal Oswal's research report on Aditya Birla Fashion and Retail

Aurobindo Pharma (ARBP) delivered better-than-expected performance in 2QFY24. ARBP posted superior growth across key markets of the US/ EU and even in the ARV formulation segment. This was further supported by lower raw material costs, driving better profitability. With the g-Revlimid launch, margins are likely to be better in the coming quarters. We raise our earnings estimates by 6%/5% for FY24/FY25, factoring in: 1) the benefit from reduced price erosion in the base portfolio, and b) improved operating leverage. We value ARBP at 15x 12M forward earnings to arrive at our TP of INR970. ARBP continues to put effort into building a robust product pipeline for its focus market, including niche opportunities in injectables, and biosimilar domains. The much-awaited Pen-G project is also on track to gain commercial benefit from FY25E onwards.

Outlook

However, at valuations of 18x/16x FY24/FY25 earnings, the upside is limited. Hence, we reiterate our Neutral rating on the stock.

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