MOSL: AUROBINDO PHARMA (Buy)- In-line operating performance-resolution at injectable plants key
Aurobindo Pharma: In-line operating performance; resolution at injectable plants key
(ARBP IN, Mkt Cap USD6.0b, CMP INR602, TP INR820, 36% Upside, Buy)
- 3QFY18 sales grew 11% YoY to INR43.4b (est. of INR42.6b). Gross margin improved ~200bp YoY (-200bp QoQ). EBITDA grew ~15% YoY to INR10.3b (est. of INR10b). PAT rose ~3% YoY to INR5.9b (v/s est. of INR6.4b), but was impacted by one-time charge of INR664m due to a change in the US tax law.
- US business shines; EU surprises positively: US business sales came in at USD295m (+10% YoY, -32% QoQ). Injectable business sales stood at USD45m in 3Q, and are expected to reach USD50-55m in 4Q. Key launches such as Etanercept, Vancomycin, Toprol XL and Ertapenem are expected in the next six months. EU business grew ~37% YoY. Adj. for Generis acquisition, the EU business grew by 23% YoY.
- Injectable plants’ inspection due; early resolution is key: Four products of ARBP had been recalled by the USFDA (three products from unit-IV). ARBP has closed Corrective and Preventive Actions (CAPA) for two products. Due to these re-calls, there will be a scheduled USFDA inspection at the Unit-4 and Unit-12 plants. It is important for ARBP to clear these inspections successfully. These two plants account for sales of USD180m.
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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