Motilal Oswal's research report on Aurobindo Pharma
ARBP delivered better than expected 3QFY23, led by healthy traction in the US/ARV/EU segment. The company registered a 7%/6% beat on sales/EBITDA, respectively. However, the earnings were below estimate (7% miss) due to higher depreciation/interest cost/tax outgo for the quarter. ARBP remains on track with respect to product development in the bio-similar space. It is also witnessing a ramp-up in its global injectables business over the medium term. We raise earnings estimate for FY23/FY24/FY25 by 4.5%/2%/2%, respectively, to factor in a) the impact of reduction in price erosion on the base business, b) robust new launches in US/EU and c) higher R&D spend on biosimilars. We value ARBP at 11x 12M forward earnings to arrive at price target of INR500.
Outlook
ARBP is in the process of building additional levers of growth such as Peng project, a biosimilar pipeline, and niche products in the generics space (including injectables). However, the earnings CAGR is expected to be moderate at 14% over FY23-25. Adequately factoring this upside potential into our valuation, we reiterate our Neutral stance on the stock.
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