Buy Aurobindo Pharma Firm performance; Anand Rathi

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Aurobindo Pharma
Firm performance; reiterate Buy
Aurobindo’s 3Q results were above our estimates. Revenue grew
30.3% yoy to `11.9bn (vs. our estimate of `10bn). Adjusted net
profit rose 27.5% yoy (vs. our estimate of 15.6% decline) mainly
led by continued boost from higher dossier licensing income.

 Growth across segments. Revenue (ex dossier licensing) grew
30% yoy driven by robust 53.3% growth in formulations and 9.3%
growth in APIs. Within the formulations segment, growth was
equally strong in the US (48%), EU (36%), ROW (72%) and
ARVs (64%). Formulations’ contribution increased to 58.6% vs.
50.2% in 3QFY10.
 Boost from dossier licensing income. Dossier licensing income
continued to be strong and increased to `1.2bn during the quarter
and `2.3bn in 9MFY11. We believe that this income has largely
come from Pfizer for global supply deals.
 Outlook. We expect the growth to continue to be strong,
considering strong products pipeline, increasing capacity
utilization and gradual rise in supply of products to Pfizer for
regulated as well as emerging markets. Management maintains
US$2bn revenue guidance for CY13.
 Valuation. At current market price, Aurobindo trades at
attractive valuation of 10.5x FY12e and 8.8x FY13e earnings. We
reiterate Buy on the stock. Risk: delay/failure in execution of
supply contracts.