Emerging as global leader in API Aurobindo Pharma:: Centrum

Emerging as global leader in API
Aurobindo Pharma (APL) is the second largest
producer of APIs globally after Teva Pharma,
Israel. With the recent decision of Teva to
discontinue API production at its various
global sites, APL is set to benefit. The
company’s formulation business (56%
revenues) is likely to grow at 30% CAGR till
FY16 whereas its API business (44% of
revenues) is expected to grow at 15% CAGR till
FY16. APL has one of the largest product
portfolios of both API and formulations. The
management aspires to reach $2bn
(Rs1,100bn) by FY16. We have a Buy rating for
the scrip with a target price of Rs245 giving
36% upside over CMP.
Dominant global player: APL is the second largest
manufacturer of API globally after Teva, Israel. APL is
likely to benefit from the gradual exit of Teva from the
API business. The company has seven world class
manufacturing facilities for API. The company is
gradually moving from API to formulations resulting in
margin expansion.
Licensing arrangement with MNC pharma
companies: APL has entered into contracts with Pfizer,
Astra Zeneca and others for the supply of formulations
for the developing and developed markets. The
company also supplies API to generic producers in US
and Europe. APL has also entered into an agreement to
supply 8 APIs for the Japanese market.
Large product pipeline: APL has filed 170 DMFs with
US FDA, 1429 DMFs with European authorities and 534
DMFs for the RoW markets. The company has filed 268
ANDAs with US FDA of which 164 have been approved.
The company offers a basket of over 100 products to
the four large distributors in the US.
Entry into new markets: APL has launched its generic
products in Italy, Germany, Spain and Portugal and
expects good growth from these countries. The
company has forayed into S. Africa, Canada, Japan and
Australia and expects good growth from these markets.
Valuation: At the CMP of Rs180, the stock trades at
11.3x FY13E EPS of Rs16.0 and 5.9x FY14E EPS of Rs30.6.
We have a Buy rating for the scrip with target price of
Rs245 giving 36% upside from CMP.

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