Aurobindo Pharma - Rating – Buy; Target Price – Rs450 - Centrum

- We expect Aurobindo Pharma (APL) to report 20.2%YoY growth and 1.4%QoQ decline in revenues to Rs18.88bn. Its formulation business should grow by 30%YoY but decline by 3.5%QoQ to Rs11.85bn. Its API business is set to grow by 11%YoY and 2.1%QoQ to Rs7.33bn. The higher growth in formulation business is attributed to the successful launch of generic Cymbalta (duloxetine HCl delayed release capsules) in the first wave of launches in the US generic market.

- We expect the company to report 480bps YoY improvement in EBIDTA margin to 21.3% from 16.5%.

- We expect APL to report MTM gain of Rs153mn against a forex loss of Rs734mn on foreign loans due to ~0.7% appreciation of rupee during the quarter.

- We expect 180.3%YoY improvement in net profit to Rs2,574mn from Rs918mn due to the rise in EBIDTA margin and forex gain.

- Our target price of Rs450 is based on 11x Dec'15 EPS of Rs40.9 (earlier 9x Sept'15).

- APL's shares have shown marked improvement during the quarter due to the generic Cymbalta launch, higher exports of generics to the US and forex gain against forex loss. We expect the company's injectable business to show good growth in the US going forward. APL's share has re-rated in the recent months due to improved performance and re-rating of the pharma sector.

Source : Equity Bulls

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