Analyst Research Report Snapshot

Title:

Aurobindo Pharma Ltd.|Q1FY15 First Cut Analysis | Robust show at all fronts, European (Actavis) business integrated. Overall margin trajectory & new launches will be monitorable in future. We move our rating to BUY with target price of Rs 817 (previous ra

Price:

$35.00

Provider:

IndiaNivesh Securities Pvt Ltd

Date:

08 Aug 2014

Pages:

4

Type:

AcrobatPDF

Companies referenced:

ARBN.NS

Available for Immediate Download
Summary:

Aurobindo Pharma Ltd.|Q1FY15 First Cut Analysis Robust show at all fronts, European (Actavis) business integrated. Overall margin trajectory & new launches will be monitorable in future. We move our rating to BUY with target price of Rs 817 (previous rating & target both were Under Review) Valuations: At CMP of Rs 714, the stock is trading at P/E multiple of 14.1x of FY15E & 14x of FY16E earnings estimates. In the last 3-4 quarters, company has shown robust performance on top line as well as surprised us on the margins front on account of better product mix & positive operating leverage. We had put or rating & target under review since the time the company acquired Actavis since we believe that Actavis segment will be margin dilutive for the company. From Q1FY15 onwards Actavis business has been integrated with the European business. The numbers from Actavis are in line with our expectation. We believe in order to maintain current momentum in growth the company’s base business in US should continue to do well so that any loss from Actavis or margin dilution from Actavis can be offset by US business. However taking clues from commentary by other pharma majors which have come out with results, the competition is continuously increasing in US leading to faster & sharper price erosion. Thus to expect very high growth without sacrificing margins in US may be out of place. Therefore we remain optimistically cautious on the stock. We value the stock at 16x FY16E earnings to arrive at target price of Rs 817. We change rating & target from UR to BUY & target price of Rs 817. We intend to come out with detailed analysis after attending con call scheduled for today (08th August 2014).

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