Aurobindo Pharma’s Q1FY25 result came short of ICICI Securities expectations due lower US sales and a surge in costs. The company’s US sales dipped 1.4 per cent sequentially as supplies from Eugia unit 3 were lower due to an official action indicated (OAI) status given to the plant by the US FDA. The company’s over the counter (OTC) business also saw a seasonal dip, they said.

Despite some slowness in the June quarter, brokerages remained optimistic in their view, as the company is set to pick up on growth from the second of the year. 

This, they said will be buoyed by strong growth opportunities created due to Penicillin G unit, manufacturing capacity enhancements, greenfield sterile units, China unit, CDMO unit, and CuraTeQ, the biosimilar arm of the company, analysts at Nuvama Institutional Equities said. Penicillin G is an antibiotic drug used to treat a number of bacterial infections. 

“Application for biosimilar pegfilgrastim, and trastuzumab is likely to be approved by the European regulators in FY25; these would likely be launched in FY26. In FY26, it further aims to file biosimilar applications for bevacizumab, omalizumab. One more oncology The product, Trastuzumab, is slated to be filed in the US market by Q2FY25,” Abdulkader Puranwala and Nisha Shetty of ICICI Securities wrote in a report. 

Analysts at JM Financial believe that the company is making heavy investments in high return areas, including PenG and its derivatives, biosimilars, biologic contract development and manufacturing organisations (CDMO), specialty oncology, and complex injectables. 

These investments, they said are anticipated to drive compound annual growth rates (CAGR) of 9 per cent in revenue, 13 per cent in Ebitda, and 15 per cent in profit after tax (PAT) from FY24 to FY27, even with a significant decline in Revlimid sales projected for FY27.

Valuation call

Aurbindo’s growth is likely to continue in the US, Europe and growth markets on the back of new launches, said analysts at Nuvama remain optimistic that further capex investments will also contribute strongly in the coming years.

The brokerage has given a ‘Buy’ rating on the stock with a target price of Rs 1,686 per share. 

JM Financial, too, has a ‘Buy’ call on the counter with a target price of Rs 1,710. The brokerage said that Aurbindo’s business fundamentals are improving and it has its structural growth drivers in place, and the stock represents a significant discount compared to peers. 

Global brokerages also remained bullish on stock with HSBC and Investec both maintaining a Buy rating on Auro Pharma, with HSBC raising its target price to Rs 1,650 per share and Investec setting a target price of Rs 1,400 per share.

However, not all agree on the company’s present valuations, analysts at Kotak Institutional Equities said that while medium-term growth prospects look intact for Aurobindo, the  valuations at 19 times FY2026 earnings price in the positives. While regulatory issues also remain an overhang, they said. The brokerage retained its ‘Sell’ call on the stock with a target price of Rs 1,175.

Analysts at ICICI Securities, also downgraded the stock to ‘Add’ from ‘Buy’ at a target price of Rs 1,620, based on 18 times FY26 earning per share (EPS).

Financial print Q1FY25

Aurobindo Pharma reported its Q1 FY25 results with a 10 per cent increase in revenue, reaching Rs 7,567 crore compared to Rs 6,851 crore in the previous year. 

Earnings before interest, taxes, depreciation, and amortisation (Ebitda) rose by 40 per cent to Rs 1,619 crore from Rs 1,153 crore, while the Ebitda margin improved to 21.4 per cent from 16.8 per cent. Net profit surged 61 per cent, totaling Rs 918 crore compared to Rs 570 crore in the same period last year.

At 03:22 PM; the stock price of the company was trading 3.07 per cent lower at Rs 1505.25 per share on the BSE. By comparison the BSE Sensex slipped by 0.86 per cent at 78,967 levels.

First Published: Aug 13 2024 | 3:29 PM IST