FREE

MOSL: Morning India (7/September/18): 1. Aurobindo Pharma (A Master Stroke); 2. Bharti Infratel (Exit overhang largely behind); 3. Bharat Electronics; 4. NHPC

MOrning India (7/September/18): 1. Aurobindo Pharma (A Master Stroke); 2. Bharti Infratel (Exit overhang largely behind); 3. Bharat Electronics; 4. NHPC

 

Today’s top research idea

Aurobindo Pharma: A Master Stroke; Sandoz deal at attractive valuation

• ARBP will acquire the dermatology and oral solids business (sales of USD0.6b in 1HCY18) from Sandoz for a cash consideration of USD900m.
• The company guided for sales of USD900m and a company-level EBITDA margin for the first 12 months post completion of the transaction (likely in 1QFY20). Accordingly, the deal turns out to be at an attractive valuation of ~1x EV/sales and ~4.3x EV/EBITDA.
• The acquisition would add ~300 products and enhance manufacturing capabilities in the US.

We expect incremental PAT of ~USD92m on a 12-month basis from this deal. We raise our FY20 EPS estimate by 20% to INR59 to factor in this acquisition. We value ARBP at a 12-month forward P/E of 15x (unchanged) and revise our TP to INR910 (prior: INR750). Re-iterate Buy.

Piping hot news

Bajaj Auto to up 3-wheeler, quadricycle capacity to 1-million a year

• Bajaj Auto Thursday said it plans to expand its 3-wheeler and quadricycle capacity to one million per year following the government's decision to exempt EVs and automobiles run on alternative fuel from permit requirements. The Pune-based auto major is the market leader with 86 per cent market share in the alternate fuel 3-wheelers. "Bajaj will shortly enhance its production capacities of 3-wheelers and quadricycles to one million per year," Bajaj Auto said in a statement.