KR Choksey has given Accumulate recommendation for Aurobindo Pharma with a target price of Rs. 626 in its research report issued on Aug 18, 2022

KR Choksey’s research report on Aurobindo Pharma

Aurobindo reported revenue growth of 9.4% YoY (+7.3% QoQ) to INR 62.36 bn in Q1FY23 after a continuous decline in growth, on a YoY basis, over the last few quarters. This improvement was the result of a return of growth in the US, strong growth in Growth markets, and robust growth posted in Anti-Retroviral (ARV) segment. Gross Profit Margins (GPMs) declined 479 bps YoY (-284 bps QoQ) to 53.7% in Q1FY23 due to increased raw materials costs, YoY and QoQ, in Q1FY23. EBITDA Margins for the quarter declined 574 bps YoY (-130 bps QoQ) to 15.5% and EBITDA declined 20.2% YoY (-1.0% QoQ) to INR 9.65 bn in Q1FY23. Injectables revenue now forms 26.3% of the US revenue vs. 24.6% it was in Q1FY22 and 26.8% it was in Q4FY22.

Outlook

We apply the same 10.5x multiple on FY24E EPS of INR 59.61 (vs. earlier INR 57.63) and increase the Target Price (TP) to INR 626 (vs. earlier TP of INR 605). Since it indicates an upside potential of 7.9% over the CMP, we maintain our “ACCUMULATE” rating on the shares of Aurobindo Pharma.

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