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Aurobindo Pharma
Strong quarter, maintain Buy
Healthy Q2FY11 results. Aurobindo reported good 2QFY11
figures: yoy growth of 26.1% in revenue and 36.9% in adjusted net
profit. Dossier licensing income was Rs699m vs. Rs402m in
2QFY10. EBITDA margin (ex dossier licensing) fell 210bp yoy to
17.7% due to foreign currency fluctuations, but qoq improved
260bp.
Formulations – Key driver. Formulations (58% of revenue)
grew 38.3% yoy, while API grew 6.9% yoy. Formulations growth
was driven by 28.8% growth in the US, 48.5% in ARVs (antiretrovirals),
54.7% in the EU and 40.1% in ROW markets.
Highlights. Increase in dossier licensing income to Rs699m
chiefly arose from the Astra Zeneca agreement signed in 2QFY11.
Aurobindo reported forex gain of Rs762m in 2QFY11, including
Rs210m on account of FCCB re-statement. We have considered
total forex gain as an extraordinary item.
Outlook. We expect the growth momentum to continue, driven
by a pick-up in supplies to Pfizer, a ramp-up in the recently
commercialised plant at the Hyderabad SEZ and increasing
product approvals for different markets. We maintain our
estimates.
Valuation and risks. At CMP, Aurobindo trades at 14.4x FY11e
and 11.4x FY12e earnings. We retain our target price of `1,560
and re-iterate Buy. Risks: Delay or failure in execution of supply
contracts.
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