Stock Pick
Aurobindo Pharma x CMP : 695.8 x PE : 17.224
* As on Nov 23
Best in play
The company is best placed to weather the regulatory storm , as it is building capabilities and entering new geographies , says Malini Bhupta
140 120 100
`122.10
Why Buy ? n Solid perforamce in H1 of FY18 . n Focus on injectables to drive future growth n Goldman Sachs says Aurobindo faces limited regulatory risk
Watch Out for n Pricing pressure in key markets n Delays in approvals for new products by regulators n The company has got approval for only 2 new products in Q2FY18
Financials
Net Sales ( ` crore ) PAT ( `crore )
FY17 14909.54 FY17 2296.17
FY16
13794.65
FY16
2022.14
80 |
FY15 12120.52 |
|
FY15 1571.26 |
|
60 40 |
Aurobindo Pharma BSE Sensex |
`61.71 |
OP ( `crore )
FY17 3550.17
|
EPS ( ` )
FY17 39.284
|
20 |
FY16 3391.92 |
|
FY16 34.605 |
|
00 Jan 1 , 2015
Aurobindo Pharma has emerged as a favoured pick of analysts , as it is among few pharma companies to have reported strong sales growth in the first six months of FY18 . The reason for this is diversification in its product portfolio and geographical mix . For instance , in the July-September quarter , revenues from Europe were up by 37 per cent compared to the corresponding period in the previous fiscal year , while rest of the world markets grew by 38 per cent . With its peers facing significant regulatory risks , Aurobindo pharma has been busy scaling up its capabilities in complex generics and injectables . Revenues from the injectables business in FY17 stood at $ 150 million , analysts expect this to grow at a CAGR ( compounded annual growth rate ) of 40
Nov 23 , 2017
per cent over the next few years . Like most other generics manufacturers , the price erosion ( companies having to charge lower prices for the same products due to competition ) is very high . But this is more so in the oral solids ( tablets and capsules ), claim analysts . The company is building capability in nutraceuticals , over-the-counter drugs , controlled substances , and injectables . There has been no price erosion in the injectables business . Despite the change in focus , 70 per cent of the company ’ s US sales still come from oral solids and it will take the company some time to build muscle in these new areas .
In addition to defocusing from oral solids , where the competition is very high , Aurobindo Pharma is also bringing new manufacturing facilities , which will aid new launches . The company intends to spend 5 per cent
FY15
2660.33
FY15
53.965
OP : Operating profit ; PAT : Profit after tax ; EPS : Earnings per share
Note : Aurobindo Pharma had announced bonus in 2015 in the ratio of 1:1 . The share has been quoting exbonus from July 20 , 2015 .
of revenues on research and development in FY18 . On the downside , the company ’ s interest payout will increase as its debt is also rising because of the acquisition of Generis Farmaceutica SA and this acquisition was funded by debt .
The stock price has risen 33 per cent in the last six months , even as the stock has delivered measly returns of 4 per cent in last 12 months . Leading brokerages like Citi Equities Research and Goldman Sachs have a ‘ Buy ’ rating on the stock .
Goldman Sachs is of the opinion that the company faces limited regulatory risk , unlike most other players . However , erosion in its base business ( oral solids ) in the US will continue to be a downside .
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Outlook Money December 2017 www . outlookmoney . com