hi sourabh,
technically, the charts are good. stock should break to new highs sooner than later. any correction of 15-20% is a buy. fundamentally, this forex loss is a transient thing and should not matter to the long term outlook of company growing at 25-30% cagr for next many years.
EDELWEISS TOO GIVES A BUY RATING FOR AUROBINDO WITH A TARGET OF 343
Aurobindo PharmaĆ¢s (ARBP) Q2FY14 adjusted PAT of INR2.88bn (up 68%
QoQ) was significantly ahead of our INR1.76bn estimate. The
outperformance was due to robust US growth (53% YoY in constant
currency), improved realisations from favourable currency and operating
leverage. While revenue growth of 27.6% was in line, EBITDA margin at
22.9% expanded 620bps YoY. The expected scale up in injectibles and
controlled substances in US and recovery in Cephalosporin (Unit-VI) are
likely to yield stronger H2FY14. We thus expect margin to sustain at 19-
20% for FY14/15E and hence raise our FY14E and FY15E EPS from INR22
and INR28 per share to INR29 and INR34 per share, respectively. Our
revised TP of INR343 (INR280 earlier) is based on 10x FY15E EPS. We
believe sustainable operational performance will restore confidence over
execution, resulting in valuation rerating. Reiterate Ć¢BUYĆ¢.
Robust outlook on back of strong US pipeline
US generics, which contributes ~58% to formulations, is a key growth driver. ARBP has
157 pending approvals, of which ~50% are in injectibles and controlled substances.
Management plans to scale up these businesses significantly over H2FY14 with launch
of four controlled substance products (addressable market USD3bn) and three
injectibles (currently in shortage). Moreover, it expects to gain additional USD15mn
sales from resupply of Cephalosporins during the same period.
Building injectibles franchise in US
ARBP has identified injectibles as key focus area and is investing upfront to build a
strong pipeline of 100 ANDAs from current 42. It has completed acquisition of Celon to
accelerate growth in hormones/oncology injectibles. It expects to file 22 products from
the acquired site. These assets will render higher growth and margin over FY16/17
Outlook and valuations: Strong earnings upside; reiterate Ć¢BUYĆ¢
We expect 50% earnings CAGR over FY13-15E as investments peak and strong traction
from US pipeline offers positive operating leverage. Management has guided for
sustainable margins with stronger H2FY14. ARBP has repaid USD65mn debt YTD which
allays investor concerns. We maintain Ć¢BUY/SOĆ¢ recommendation/rating on the stock
Financials (Consolidated) (INR mn)
Year to March Q2FY14 Q2FY13 % change Q1FY14 % change FY13 FY14E FY15E
Net revenue 19,139 15,004 27.6 17,156 11.6 58,553 7 5,958 8 7,168
EBITDA 4,384 2,503 75.1 3,077 42.5 8,891 1 5,093 1 7,225
Adj. net profit 2,882 1,334 116.0 1,714 68.2 4,213 8 ,401 9 ,978
Adj. Dil. EPS (INR) 9.9 4.6 5.9 1 4.5 2 8.9 3 4.3
Diluted P/E (x)-core 20.8 9.0 7 .5
Core EV/EBITDA (x) 12.2 7.0 5 .9
ROAE(%) 18.5 2 7.7 2 5.8
Holding Ć¢ Top10 HDFC MF IS ALSO A 9% SHAREHOLDER APPROX
Perc. Holding Perc. Holding
Rani penaka suneela 31.19 Hdfc asset managemen 8.66
Reddy p v ramaprasad 6.69 Reddy k nityananda 4.73
Reddy k nithyananda 4.73 Reddy kambam kirthi 3.73
Morgan stanley 2.77 Sivakumaran m 2.52
Trident chemphar ltd 2.09 Spoorthi kambam 1.3
*in last one year
HDFC SEC also gives a buy call to Aurobindo with a target of 348
Still attractive Aurobindo Pharma (ARBP) has witnessed consistent
improvement in its revenue/margin over the last six
quarters driven by resolution of USFDA compliance
issues, better product mix in the US and de-focus on
low margin ARV tenders. Revenues have grown at
20% coupled with impressive margin improvement
(from 11.5% in 1QFY13 to 22.9% in 2QFY14).
Going ahead we expect the traction in revenues to
continue as its product pipeline materializes. ARPB
has strategically built pipeline for the next 5-6 years
targeting the US market. While the first leg of
growth will be driven by injectables and controlled
substance products (through increased filings), the
second leg of growth would be led by peptides and
oncology injectables driven by acquisition (acquired
Celon Labs). High debt (~Rs34bn) continues to be a
concern, but improving free cash flow generation
and better return ratios (RoCE up from 9.5% in FY13
to 15.4% in FY15E) gives comfort.
At CMP, ARBP trades at mere 7.5x FY15E EPS,
making it one of the attractive companies from a
relative valuation perspective.
i Robust 2QFY14 : ARBP posted strong revenue
growth of 28% at Rs 19.1bn, EBIDTA margin at
22.9% expanded 620bps YoY aided by better
realization and product mix. APAT came in at Rs
2.93bn, up 124% YoY.
i US a key driver : Post witnessing a rough time for its
US business with two units under FDA import alert,
ARPB has made a strong comeback this fiscal driven
by FDA resolution and new launches. Continued
launches in niche segments would lead to 31% (in Rs
terms) CAGR over FY13-15E.
i Margins to remain steady : Though current
quarter margins are mainly driven by better
realizations, we expect ARBPas margins to be
consistent at 20%+ levels in FY14/15E led by niche
product launches and improving operating leverage
(current capacity utilization at ~70%).
i Valuation : We believe ARBP holds immense value
at current levels given its robust visibility in
revenue/PAT (21/55% CAGR over FY13-15E) and
improved visibility beyond FY15E. We value ARBP at
10x FY15E EPS and recommend BUY with a TP of Rs 348
http://www.hdfcsec.com/Share-Market-Research/Research-Details/StockReports/2998831
hi vivek,
i would request you to put these reports up on the related stock thread to avoid clutter and let other members read these reports.
cheers,
hemant
Hemant could you give TA for Natco Pharma n Gillette India?
Hemant,
Congrats Mayur performing well as predicted by you.
Today it touched 369.
Any updates on it please
Hi Hemant ,
Aurobindo performed well as per your analysis 
What are the stocks which are currently under your radar ?
hi vivek and sourabh,
I am currently very busy in my job and hence i havenāt been posting much on valuepickr. i hope to get over that soon and start my regular contributions again.
for the next year or so, i am bullish on pi ind, astral, poly med, ajanta pharma and page ind. i think all of these can provide 35-40 percent returns from here over the next 12-15 months.
Is today right time to book partial profit in Astral?
Regard,
Subhajit
hi Hemant
Could you give a snapshot of your current portfolio and some of the scripts you are bullish on for 2014?
Thanks
hii hemant wimplast hits all time high today at 444 can u pls give any technical updates for the stock wimplast
hi guys,
here is my long-term portfolio constructed since dec-11:
Learn to read time-stamps on posts buddy, I mean Jeeez !!!
Its been a while since a posted on valuepickr due to work and personal commitments. here is what i think of the markets and stocks at the moment:
market view:
s&p and other global indicies have extended ther bull markets which augurs well for EMs. lack of growth options in other BRIC countries has helped India garner more than its fair share of fund flows helping it to break out of its 6 year long pattern. I sm still not happy woth the wave structure to call it a bull market but you canāt foght the tape so until it holds 5950 on a weekly closing basis, we are headed a lot higher.
potfolio:
finance - hdfc bk, gruh, repco, indusind bk
agro - pi inds, kaveri
healthcare - ajanta, almebic, shilpa, polymed, granules
processors - mayur, astral
consumption - page, cera
views: portfolio had a good run over the last 2-2.5 months. booked a 100% gain in autobindo and granules(still hold some). at current prices kaveri, ajanta and repco look good.
Hi Hemant,
Its been a long time since you posted. Since you are based out of Europe, just wanted to know two things from you:
1). How are things looking in Europe on growth front? Are things improving at the ground level? How is the consumer confidence there?
2). How are the drug regulations in European markets? Are the drug regulators as stringent as the USFDA?
Thanks
hi ankit,
1). europe is improving a lot better than people think. the ground level interest and activities have picked up. stability to the credit spreads and equity indices has returned. finanncial conditions have eased and balancesheets are on the mend. all this will start getting reflected in the numbers in a next few quarters. europe would not have a roaring growth but the growth environment should improve.
2). I am not fully aware of the actual regulatory environment here. i will try to find out more but the generic penetration is lot less in europe than in US. also, the pricing is not as attractive. the national health service in UK is very active and that provides a stable source of generic income for pharma companies but the healthcare insurance companies have a tight control on pricing.
Welcome back Hemant. Looking forward to more interactions .
Cud u just have a look at my portfolio posted in other thread on VP yesterday n give your valuable comments please.?
Also your TA on EIL , LICHF, n L&T finance please.
Hello Hemant bhai,
Have you completely exited Atul auto?Any reason?
Yes exited in the last run-up. It continues to be a 20% grower but I had better opportunities available. I thought banks would be a better bet to play the recovery theme.
