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Aurobindo Pharma 3QFY2014 performance highlights and results update

February 10, 2014, Monday, 15:39 GMT | 10:39 EST | 21:09 IST | 23:39 SGT
Contributed by Angel Broking


For 3QFY2014, Aurobindo Pharma (APL), posted a good set of numbers, much ahead of our expectations. The company posted sales of Rs.2136cr (vs an expected Rs.1790cr), registering a growth of 37.6% yoy. The OPM expanded by 14.4% yoy to end the period at 29.9% vs 15.5% during the corresponding period of last year. This led the adjusted net profit to come in at Rs.416cr vs Rs.137cr in the corresponding period of last year. We upgrade the stock to Accumulate with a price target of 581.
 
A better than expected result: Aurobindo Pharma posted a good set of numbers for the quarter, much ahead of our expectations. For the quarter, the company posted sales of Rs.2136cr (vs an expected Rs.1,790cr), registering a growth of 37.6% yoy. The growth was mainly driven by US formulations, which grew by 81.4% yoy. The gross margins expanded by 8.3% yoy, on a better product mix. This along with operating leverage aided the OPM to expand by 14.4% yoy to end the period at 29.9% vs 15.5% during the corresponding period of last year. This led the reported net profit to come in at Rs.418cr vs Rs.92cr in 3QFY2013 and the adjusted net profit to come in at Rs.416cr vs Rs.137cr during the corresponding period of last year.
 
Outlook and valuation: We estimate the company’s net sales to log a 39.8% CAGR to Rs.11,296cr over FY2013–15 on the back of supply agreements in the US and antiretroviral (ARV) formulation contracts, which will be supplemented through the recent acquisition of the Western European formulation business of Activas. This has also led APL to become a ~US$2bn sales company, with more than 85% of sales being accounted by formulations. Thus we expect the company to trade at higher multiples in comparison to its historical multiples. We recommend an Accumulate on the company with a price target of Rs.581.

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