Prabhudas Lilladher is bullish on Aurobindo Pharma has recommended buy rating on the stock with a target price of Rs 909 in its research report dated November 13, 2018.
Prabhudas Lilladher's research report on Aurobindo Pharma
ARBP's performance in Q2FY19 were in-line with our estimates as its net sales, adj. EBITDA and PAT increased by 12%, 33% and 34% QoQ respectively. Adjusted with exceptional costs (consultancy for legal and due diligence before acquisition of businesses from Apotex and Sandoz) of Rs268m, PAT grew 38% QoQ in Q2FY19 despite of headwinds in base business due to competitive intensity and price erosions. ARBP provisioned forex loss of Rs387m due to MTM adjustment of its loan portfolio while Rs10m was realized loss due to expiry of forward contract. With guidance of robust pipeline and visibility from the waves of complex generics till FY20E, we expect ARBP's US generics to grow at 10% CAGR in FY18E-20E as price erosion in its portfolio is gradual stabilizing at 6-8%. Near term growth drivers are gWelchol, gErtapenem, gToprol XL, Vancomycin, OTC drugs (10-12 launches) in US and DTG in ARV business. Management also guided for a key launches of an injectable and developed sizeable inventory estimating approval in January CY19. We believe the product could be partner's product in peptide segment as ARBP has agreement for supplying API for partner in US.
Outlook
The stock trades at PE 16.6x of FY19E and 15.2x of FY20E, an attractive discount of 20-25% to the valuation of the peers among the large-cap pharma companies. We maintain BUY and retain TP at Rs909.
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