Motilal Oswal has recommended a BUY on Aurobindo Pharma with a Target Price of Rs. 980, and an upside of 17% from CMP of Rs. 839.
Aurobindo Pharma (ARBP) delivered better-than-expected EBITDA, led by a) strong off-take in the ARV / Growth Market segment, b) revival in EU sales, c) steady ramp-up in US sales, and d) better gross margins (GM). Increased R&D spend, to some extent, affected profitability for the quarter.
We tweak our EPS estimate for ARBP for FY21/FY22, factoring in: a) a superior product mix, b) a higher spend on complex product development, and c) higher other income. We continue to value ARBP at 15x 12M forward earnings to arrive at TP of INR980. We remain positive on ARBP on the back of a) a robust ANDA pipeline, b) enhanced efforts toward developing as well as building manufacturing capacity for future products – comprising biosimilars, inhalers, transdermals, nasals, and injectables – for the developed markets, c) a steady base portfolio, and d) a healthy balance sheet. Reiterate Buy.