Buy Aurobindo Pharma Ltd For Target Rs.600 - Motilal Oswal Financial Services
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Earnings decline for second consecutive year
Levers in place to deliver growth over next two years
* 4QFY23 sales grew 11% YoY to INR65b (est. INR63b). Total formulation sales rose 11% YoY to INR54.6b. US generics revenue grew 12% YoY to INR31b (flat YoY in CC terms at USD370m; 47% of sales). Growth Market sales jumped 51% YoY to INR6b (9% of sales). Europe formulation sales grew 8% YoY to INR16.6b (26% of sales). ARV sales declined 33% YoY to INR1.6b (2% of sales). API sales rose 11% YoY to INR10.2b (16% of sales).
* Gross margin contracted 190bp YoY to 54.7% due to product mix change.
* EBITDA margin declined 130bp to 15.5% (est. 15%). Lower gross margin and higher other expenses (+210bp YoY as a % of sales) hurt profitability for the quarter, marginally offset by a decline in employee/R&D expenses (-150bp/-110bp as a % of sales).
* EBITDA grew 3% YoY to INR10b (est. INR9.5b).
* Adjusting for the forex gain of INR227m, PAT declined 10% YoY to INR5.2b (est. INR4.7b), due to higher depreciation/interest cost.
* In FY23, revenue grew 6% YoY to INR249b, while EBITDA/PAT declined 8%/14% YoY to INR40b/INR22b.
Highlights from the management commentary
? ARBP has guided for double double-digit YoY growth in Eugia revenue in FY24.
? It plans to launch g-Revlimid in Oct’23.
? The company intends to file b-Xolair for the US market in CY25, three to six months ahead of patent expiry (Nov’25).
? ARBP plans to spend USD130-140m for the Pen-G project in FY24 (USD120m spent in FY23).
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