Aurobindo Pharma - 4QFY2013 Result Update - Angel Broking

For 4QFY2013, Aurobindo Pharmaceuticals Ltd (APL) outperformed expectation on the top-line front, while the bottom-line came in below expectations. The OPM came lower than expectations (of 18.3%) at 14.3%. However, on back of lower taxations, the adj. net profit came in at Rs. 110cr, still lower than our estimate of Rs. 194cr. On back of improvement on the financial front and clearance of facilities by the USFDA, the company expects sales to grow by 20.0% and OPM to expand by 200-300bps for FY2014. We have a Buy recommendation on the stock.

Sales higher than expected: Net sales grew strongly by 32.6% yoy to Rs. 1,553cr, led by a robust growth in formulations (41.4% yoy growth). The active pharmaceutical ingredients (API) segment grew by 17.0% yoy. Formulations in key geographies like the US, and Europe and rest of world (RoW) grew by 61.5% and 44.9% respectively. Gross margin came in at 48.2% (vs 45.2% in 4QFY2012) on back of favourable product mix, thus impacting the OPM which came in at 14.3% vs10.2% in the corresponding quarter of the previous year. This led the company to post an Adj. net profit of Rs. 110cr.

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 14.9% CAGR to Rs. 7,637cr over FY2013–15E 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 on the stock with a price target of Rs. 271.

Source : Equity Bulls

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