promoter has got stake in reality firm aurobindo reality , recently they brought lands from GMR infra also they are developing residential properties. My guess in order to fund these they are pledging shares. I may be completely wrong also
What would be revenue/profit impact?
Aurobindo Pharma Shares Fall 6% After U.S. FDA Warning Letter For Subsidiary
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Good Q2 results https://www.bseindia.com/xml-data/corpfiling/AttachLive/b0f537e3-e7e9-4c8c-967a-9c32f74c5f31.pdf
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Sell of NatrolAurobindo https://bit.ly/31I4L84
- November 2014 - Natrol Aquition - $132.5 million (Rs 815 crore)
- Sep 2020 - Natrol Sell - $550 million (Rs 4,048 crore)
- Natrol Yearly Sales on Mar2020 - 157 million (Rs 1200 Cr)
This will help Auro to achieve ZERO NET DEBT
- Pledge Share increase - this is alarming
Good video to understand PLI scheme impact on and other milestones for Aurobindo pharma
- PLI - 41% for four product - Penicillin G, 7 ACA, Erythromycin Thiocyanate TICO, Clavulanic Acid
- Price difference btwn Chinese and Indian - 15 to 20% - which expected to set off by PLI. In next 3-4 years customer base will shift to India from China
- Aurobindo got PLI for - Penicillin G, 7 ACA, Erythromycin Thiocyanate TICO
- Aurobindo may benefit from EM where due to less regulatory challenge API source change would be allowed
- Aurobindo may benefit from ANIT CHINA in USA to grab new US based customers for API
- Antibiotics margin - 15% but incentive will take it to 20%… Capex 3040 Cr and PLI incentive 2400 Cr over 6 years
- Auro milestones to watch --> Complex generic file in USA, Bio Similar Development, Vaccine development
Disc: Invested and views may be biased and planning to add more after reviewing Q3FY20 results or dips
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Aurobindo Pharma
Highlights from the management commentary
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ARBP has 15-20 complex Injectable products under various stages of development. It would be making exhibit batches for four products over the next 3-4 months and expects to file the same by FY22-end.
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Phase II/III study application for UB612 (COVID vaccine) has been submitted to the Indian drug authority (DCGI). It awaits approval for starting clinical trials.
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Contract manufacturing of 25m UB612 doses would start in the near future for Taiwan as well as various other countries.
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ARBP expects to file two Biosimilars products for the European market in 2HFY22. These are Oncology-based Biosimilars. This would be followed up with two more products filings in FY23.
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Aurobindo acquired a animal pharma company Cronus for 420 crore . Considering the turnover for the company is around 11 it is at 40x valuation . IMO this is an expensive acquisition even though Cronus has got 67 products under pipeline
Turnover for the financial year:
2019-20 - RS.6.6 Crores
2020-21 - RS.11.4 Crores
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Any possible advice on Aurobindo Pharma for its poor performance in the last 7-8 months . It is down by aroud 18% in spite of almost all its paameters and ratios looking very good ( barring the recent quarter degrowth . It is a highly undervalued stock as of now . Some legal/regulatory issues are said to be there against the company. Today it is down by 7.84% , a sharp decline for the stock. Is there any news on it ?
I was planning to go for a buy on this dip to avaerage out losses on my current holding . Seek advice and opinios please .
I think the poor performance is due to increasing promoter pledging, it’s at the highest currently. 11%
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Degrowth in US Generics business was expected and it was never fully priced in. Refer to the chart of Alembic Pharma, it has a similar trajectory in terms of price action.
Aurobindo was somehow buoyant at higher prices and then yesterday it corrected badly.
I personally have been accumulating on dips, because I see value unlock in their upcoming Injectibles business demerger.
Disl: Invested, maybe biased. Not financial advice.
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Pledging of shares by promotors is there for a long time as they started investing in Aurobindo reality. One reason for sharp decrease in price is high valuation for acquisition even though in con call they claimed it is not related party transactions and acquired company will achieve around 100 million sale in another 2-3 year , market is not taking it as it is. Price erosion in Usa is visible and after 1-2 years it started hitting back all pharma companies. Aurobindo is trying many things at same time - PLI, biosimilars, vaccines, injectable etc and now animal vetinary. Gross block is getting higher and higher. Which one will bring topline growth is a question time can only tell. Their compliance record is very poor, again they receive observation for API unit . I just wonder why it is hard for them learn even after all these years.
Disc: invested
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We can only comment on Cronus after going into the details of the products of Cronus. The website says it is a US-based company… Anyone expert in this topic can comment. This is the website (Partner – Cronus Pharma)
Cancelled the recently announced acquisiton
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What may be the reasons behind this? Also what about Unit 1 observation will impact? So many chartist are barking in the street about 200 day moving average below looks like yes Bank!!!
Views are welcome
Disc: invested
One reason might be the high valuation and huge drop in share price. In last 1 week promotors pledged more share in order to accommodate dropping share price. There were multiple block deals and mutual funds trimmed share price . Unit 1 observation are not repeated in nature and mainly procedural
Disc: invested
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I have started studying Aurobindo from few weeks and have taken tracking position at 750 rupees. I am looking to add more in recent drops in share price.
My takeaways are:
- trading at very cheap valuation as compare to others. PE ratio is around 7 .
- Management has reverted its decision of acquiring cronus which imo is good.
- Promoter pledging of share for Auro real estate is bad decision in my opinion.
- Business geography risk is high and it is very concentrated especially for US business.
- lower spending in R&D as compare to others.
With recent fall in share prices i think it is good to add in sip mode.Is there something else I am missing? Please provide you feedback as I am new to this world of investing.
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It is not ~7 P/E if you exclude One-Off gain In Q3 (Rs 2,813.9 crore). It is ~12.20. The below is calculation.
5,324 net profit in TTM (FY21) - 2,813.9 crore one-off gain + 759 crore (27% tax of 2,813.9 crore) = 3270 crore after excluding one-off gain
P/E is 12.20 excluding one-off gain the market cap is 39,908 crore and 3270 crores net profit.
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Disc: invested
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One important aspect is the political proximity/ affiliations of the promoters. While each investor has a different tolerence level, I am highly skeptical of promoters who cozy up with politicians for various reasons (front, quid pro quo, etc). Do consider this aspect as well before investing.
Disc: Invested in the past, missed checking out the promoter background. Recently exited all holdings after the latest uproar.