Largecap Pharma Stock's Sales Up 28% To Rs. 3.8bn, API Grew Strongly, Accumulate Stock: Prabhudas Lilladher

Top brokerage firm Prabhudas Lilladher recommends investors to accumulate the stocks of Aurobindo Pharma. Its sales improved by 28% YoY to Rs. 3.8 bn, gained 10% QoQ. API sales grew strongly by 12% YoY on increased demand for key products. According to recently available reports, the USFDA has approved Aurobindo Pharma-owned Eugias generic Vasopressin injection, which is expected to boost its growth trajectory. The Current Market Price (CMP) of Aurobindo Pharma is Rs. 593. Prabhudas Lilladher has estimated a Target Price for the stock at Rs. 635. This stock has the potential to give a 7% return, in the upcoming 1 year. This is a large-cap stock with a market capitalization of around Rs. 34,218 crore. The company is offering a 1.54% dividend yield.Stock Outlook Current Market Price (CMP)Rs. 593Target PriceRs. 635Potential 1 year return7.00%52 week high share priceRs. 768.4552 week low share priceRs. 503.45 Aurobindo Pharmas formulation business sales grew 9% YoY and QoQ at Rs. 53 bn. US revenue came at $385 m, primarily on volume growth and lower than expected price erosion. Gross margins came in at 53.7% on higher input cost. Moreover, other expenses were up 3% QoQ and up 20% YoY mainly led by higher freight costs and one off expenses to the tune of Rs. 600 mn. Resultant EBIDTA came in at Rs. 9.7bn.Advertisement Commenting on the advantages of the stock, Prabhudas Lilladher said, Aurobindo Pharmas operating performance continued to remain weak in Q1FY23, given cost headwinds. Adjusted for one off EBIDTA was in line with our estimate. There was forex loss to the tune of Rs. 282 mn. The tax rate came in at 23.2%. Resultant PAT came in at Rs. 5.2bn, down 10% QoQ vs our est of Rs. 6bn. We believe cost pressures to remain in near term and margin trajectory should improve from H2FY23. However, pick up in US sales hinge on timely niche approvals along with stabilization of pricing pressure in base business. ARBP has multiple growth drivers in place with investments in vaccines, injectables, biosimilars and PLI, which are expected to be reflected from FY24. Currently, the stock is trading at 11.4x FY24E P/E. We broadly maintained our estimates. We recommend Accumulate with target price of Rs. 635. Aurobindo Pharma is a leading pharma company in India, it has also a footprint in the international business. EU sales declined by 2% YoY, while RoW business grew 30% YoY aided by domestic formulation consolidation. R&D cost came at 5% of sales; down 13% YoY. The company launched 7 new products including 4 injectable in the US market; Filed 13 ANDAs including 4 injectable in Q1, its overall reported global injectable sales of $72mn in Q1FY23; guided for double-digit growth aided by new launches and maintain its $650-700mn sales guidance over next 2-3 years. The management expects 5-8% growth for EU market in FY23 on stable business growth, and its Capex was $61mn in Q1 of which $8mn towards the PLI scheme. The above stock was picked from the brokerage report of Prabhudas Lilladher. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.