KR Choksey's research report on Aurobindo Pharma
Aurobindo reported Revenue de-growth of 2.5% YoY (-5.7% QoQ) to INR 60.0 bn, led by the US, Europe, and growth markets’ revenue declining YoY and QoQ. However, Anti-retroviral, part of formulation, (+28.7% YoY / + 10.8% QoQ) and API (+5.1% YoY /+16.4% QoQ), posted growth YoY and QoQ. EBITDA for the quarter declined 3.2% YoY (-6.9% QoQ) to INR 12.7 bn while EBITDA margins contracted 13 bps YoY/ 26 bps QoQ to 21.2% in Q4FY21 (from 21.4% in Q4FY20 and 21.5% in Q3FY21). Adj Net Profit declined 7.6% YoY (+493.4% QoQ) to INR 7.9 bn. Adj. Net Profit Margin for the quarter contracted 72 bps YoY to 13.1% (up 1,102 bps QoQ) from 13.8% in Q4FY20 and 2.1% in Q3FY21. Investment in R&D for FY21 was increased to INR 15.1 bn or 6.1% of revenue vs. INR 9.6 bn or 4.2% of revenue in FY20. Capex for FY21 was ~USD 247 million and free cash flows were at INR ~ USD 472 mn.
Outlook
In the wake of expected stable margins and expected further likely increase in share of specialty and injectable products, we roll forward our earnings to FY23E EPS of INR 65.7 per share and apply a P/E multiple of 16x and maintain our target price of INR 1,044 per share, implying a potential upside of 7.8% over the CMP. Accordingly, we downgrade our rating on the shares of Aurobindo Pharma Ltd. to an “ACCUMULATE”.
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