MOSL: AUROBINDO PHARMA (Buy)-Sales uptrend continues led by US/Europe-regulatory headwinds remain
AUROBINDO PHARMA: Sales uptrend continues led by US/Europe; regulatory headwinds remain
(ARBP IN, Mkt Cap USD3.5b, CMP INR433, TP INR500, 15% Upside, Buy)
- Superior execution in US/acquisition contribution drive revenues: Sales were up 18% YoY to INR56b (our estimate: INR54.2b) in 2QFY20, largely led by the US (+27.3% YoY to INR28b) and Europe (+21.2% YoY to INR14b). New launches, higher sales in existing products and also sales from acquired entity provided momentum during the quarter. Growth markets grew at a subdued rate of 3.8% YoY to INR3b, while ARV/API sales were down 2.5%/1.3% YoY to INR2.4b/INR8b.
- Reduced operating leverage hurts margins: Gross margin expanded 70bp YoY to 57.7% due to a favorable mix (product/geographical). However, EBITDA margin shrank 80bp YoY to 20.8% (in-line) due to higher staff cost/other expenses (+90bp/+100bp YoY). EBITDA grew 14% YoY to INR11.7b (in-line). ARBP incurred a forex loss of INR272m in the quarter. Adj. PAT increased marginally to INR6.7b (our estimate: INR6.3b) due to an increase in the tax rate.
- For 1HFY20, revenue/EBITDA/PAT were up 23%/28%/12% YoY at INR110b/INR23b/INR12b.
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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