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Result Highlights

* Ex‐Natrol US sales up 5.3% yoy while down 4.5% yoy on reported basis due to Natrol divestment  

* R&D increased to RS4.6bn, 7.6% of revenues, a significant jump on Rs2.4bn last year and Rs3.9bn in Q3

* QoQ declines across Europe, growth markets and US while ARV sales up 11% qoq; YoY decline in Europe due to stocking up last year

* Growth markets impacted by low patient flow to hospitals and pharmacies in certain markets.

Our view:

Aurobindo US injectables sales declined in FY21 offset by 8.5% growth in oral solids business. We expect a strong jump in FY22‐23 US injectables as rebound sets in. Reckon injectables restructuring (Eugia being consolidated and likely plans lined up for Unit IV) as the next trigger given the strong growth expected in injectables. Vizag unit for Europe would drive growth in FY23 and improve European margins further from current double digit.

Ramp up in Unit IV and Eugia along with monetization of Eugia and standalone injectable pipeline would be another driver of growth. Expect margin to gradually inch up as gains from injectables are offset by R&D at ~5.5‐6% of sales in FY22/23. We cut FY23 estimate by ~3% on lower ARV sales (now expected to stay flat) but retain BUY with largely unchanged TP Rs1,100.  

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