| Summary of Contents STOCK IDEA Aurobindo Pharma
Cluster: Ugly Duckling
Recommendation: Buy
Price target: Rs914
Current market price: Rs684 Betting big on formulation growth Key points - Formulation business grows at 62.2% CAGR: Aurobindo Pharma (Aurobindo) has created a robust product pipeline of 1,172 formulation dossiers for various markets and expects major growth in its speciality generic formulation business. The formulation sales are expected to gallop at a CAGR of 62.2% over FY2006-09.
- Robust product pipeline: During FY2007, Aurobindo filed 32 ANDAs and 41 DMFs, taking the cumulative DMF filings to 110 and ANDA filings to 82 in the US market. With the recent USFDA approval for products like Bisoprolol, Simvastatin and Zolpidem tartarate, we estimate incremental revenue of Rs100 crore from the US generic business during FY2008.
- European business to expand at over 50%: Aurobindo expects to deliver over 50% growth in Europe on the back of increased product registrations and synergetic benefits flowing from the recent acquisitions of Milpharm in the UK and Pharmacin in the Netherlands. It is also contemplating a couple of mid-sized acquisitions in Europe.
- Steady growth in ARV business: With most of the registrations taking place in the recent past, we expect Aurobindo to see steady growth in its ARV formulation revenues. We estimate the ARV formulation business would generate revenues worth $99 million and $128.7 million in FY2008 and FY2009 respectively.
- Consolidated PAT to grow at 70% CAGR: Going forward, the increasing traction in formulation exports would help the consolidated revenue to grow at a 24.3% CAGR during FY2006-09E(Rs3,143.1 crore in FY2009E). The adjusted net profit would gallop at a CAGR of 70% during FY2006-09 (Rs348.4 crore in FY2009E), translating into earnings of Rs57.1 per share.
- Buy with price target of Rs914: At the current market price of Rs684, Aurobindo is trading at 14.9x its FY2008E and 12.0x its FY2009E earnings. We initiate coverage on Aurobindo with a Buy recommendation and a one-year price target of Rs914 (an upside of 34% from the current levels). The price target discounts the FY2009E earnings by 16x.
|
No comments:
Post a Comment