Neutral Aurobindo Pharma; target of Rs 910: Motilal Oswal

Motilal Oswal's research report on Aurobindo Pharma

Aurobindo Pharma (ARBP) delivered operationally better-than-expected 1QFY24 performance, on the back of a healthy volume off-take in the US as well as the EU market. With improved outlook, ARBP has re-started the exercise to restructure the Eugia business and evaluate options to unlock the inherent value of its injectable business. We raise our earnings estimate by 8%/7% for FY24/FY25, factoring a) superior execution in the EU segment, b) reduced scope of price erosion in the US base portfolio, c) moderation in business prospects in the ARV segment. We value ARBP at 15x 12M forward earnings to arrive at a price target of INR910. With the current favourable macro-economic environment and broad portfolio offerings by ARBP, we believe it is well-placed to capitalize on the opportunity related to US generics. The better margins of the EU segment further support overall profitability. However, valuation provides limited upside from its current levels. We reiterate our Neutral rating on the stock.

Outlook

We value ARBP at 15x 12M forward earnings to arrive at a price target of INR910. However, valuation provides limited upside from its current levels. We reiterate our Neutral stance on the stock.

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