MOSL: AUROBINDO PHARMA (Buy)-Sales growth trends comforting-approval pace/execution hold key
Aurobindo Pharma: Sales growth trends comforting; approval pace/execution hold key
(ARBP IN, Mkt Cap USD5.8b, CMP INR686, TP INR840, 23% Upside, Buy)
- US/growth market/ARV and favorable FX drive revenues: Sales increased 31% YoY to INR53b (our estimate: INR49b), primarily led by sales growth of 30% YoY in US formulations (USD353m; 47% of sales), 38% YoY in growth market (INR3b) and 96% YoY in ARV (INR3b). EU sales were up 14% YoY at INR13b, partly led by the acquisition of Apotex operations. Moreover, ARBP exhibited healthy traction in non-betalactum API sales (+25% YoY to INR3b).
- Lower opex counterbalances gross margin contraction: Gross margin (GM) shrank 230bp YoY to 55.2% due to the change in the product mix and the integration of the acquired businesses (Apotex operations and Spectrum). However, the impact was mitigated by the EBITDA margin improvement of 150bp YoY to 21.4% (our estimate: 20.8%) owing to controlled other expenses (-260bp YoY). Consequently, EBITDA grew 32% YoY to INR11.3b (our estimate: INR10.2b). Adjusting for the exceptional expense and the forex loss, PAT growth was relatively lower at 13% YoY (INR6.6b – largely in-line) due to increased depreciation and tax rate. For FY19, sales/EBITDA/PAT increased 19%/6%/1% YoY to INR196b/INR40b/INR25b.
Aurobindo Pharma is a vertically integrated pharmaceutical group based in India. Co. maintains a product portfolio spread over major product areas encompassing CVS, CNS, Anti-Retroviral, Antibiotics, Gastroenterologicals, Anti-Diabetics and Anti-Allergic with approved manufacturing facilities by USFDA, UKMHRA, WHO, MCC-SA, ANVISA-Brazil for both APIs & Formulations. In addition to Semi-Synthetic Penicillins, Co. has a presence in key therapeutic segments such as neurosciences, cardiovascular, anti-retrovirals, anti-diabetics, gastroenterology and cephalosporins, among others. Co. exports to over 125 countries across the globe.
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