Fundamental Result Update

Aurobindo Pharma Q1FY20 Result Update



The company is confident of several new product launches and expects 40 incremental launches over next nine months. Going forward, revenue and earnings shall be driven by successful integration of Sandoz which is expected to happen in the near term. The company is investing in alternate formulations like respiratory inhalers, peptides, vaccines and depot injectables. We believe new product launches shall offset the normalized price erosion prevalent in the US markets. Further, recent developments pertaining to fire in Andhra plant leads to some risks pertaining to fresh USFDA inspections. Apart from this, the resolution to USFDA inspections in unit 3 which is a multi-product oral dosage form facility for non-cephalosporins and non-betalactams shall be a key driver in the medium term. At CMP of Rs 589, the stock is trading at 11.6x FY21E. We value the company at 13x FY21E and assign a HOLD rating to the stock with a revised target price of Rs 658 for an upside of 12%.


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