Aurobindo Pharma - 1QFY2013 Result Update - Angel Broking

For 1QFY2013, Aurobindo Pharmaceuticals Ltd (APL) posted results in-line with expectations on the top-line front, while its net profit came below expectations. The main disappointment has come on the operating front with the OPM coming in at 10.3%. We maintain our Buy view on the stock.

In-line sales expectations: Net sales grew modestly by 12.4% yoy to Rs.1,197cr, led by a robust growth in the active pharmaceutical ingredient (API) segment. The API segment grew by 27.9% yoy. On the other hand the formulation segment grew by 5.1% yoy only. But formulations in the key geographies like the US, and Europe and rest of world (RoW) grew by 19.8% and 35.8% respectively. Gross margin came in at 45.9% (46.2%), impacted by higher raw-material costs, thus impacting the OPM which came in at 10.3% vs our expectation of 15.4%. This led the company to post a net profit much lower than our expectation at around Rs.79cr.

Outlook and valuation: The commencement of operations at the Hyderabad SEZ and incremental contribution from the Pfizer deal would boost APL's earnings and provide better growth visibility going forward. We estimate net sales to log a 12.6% CAGR to Rs.5,767cr over FY2012-14E on the back of supply agreements in the US and antiretroviral (ARV) formulation contracts. Even after factoring in lower profitability going forward, the stock trades at an attractive valuation. Hence, we maintain our Buy recommendation with a revised price target of Rs.156.

Source : Equity Bulls

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