NSE: AUROPHARMA | BSE: 524804 | ISIN: INE406A01037 | Sector: Pharmaceuticals and health care
4.5/5 (26 Ratings)
AUROPHARMA Share Price *
601.85 +101.45 (20.27%)
* (quote may be delayed)
19 AUROPHARMA share price target reports by brokerages below. See what is analyst's view on AUROPHARMA share price forecast, rating, estimates, valuation and prediction behind the target. You may use these research report forecasts for long-term to medium term for your investment or trades in 2020.
We cut our EPS estimate for FY20 by 5% to INR47 to factor in the delay in the closure of the Sandoz transaction. We reduce our P/E multiple to 8x (prior: 10x) to factor in regulatory headwinds and revise our TP to INR500 (prior: INR590) on a 12M forward earnings basis. While we remain positive on ARBP based on the limited price erosion in the base business and the robust ANDA pipeline (incl. complex generics), regulatory
We expect ARBP to continue its steady performance in FY20E and post strong EPS growth of 21.3% YoY in FY21E. Near term catalysts include strong pipeline, Sandoz deal closure and potential approvals from USFDA. Hence we reiterate our BUY rating but revise our target price to Rs. 492 based on 9x FY21E adj. EPS (vs. 12x earlier) due to recent USFDA observations.
Regulatory risk has increased with escalation to OAI/WL at a few sites. However, US generics growth for ARBP is improving due to new launches/acquisitions. Further, EU (30% of sales) is penetrating into newer markets and improving margins by shifting manufacturing to India. We value ARBP at 8x 12MF earnings (40% discount to three-year average) and arrive at a TP of INR500. Maintain Buy.
In spite of 12% sequential growth in US generics, its net profit was flat QoQ and grew only 5% YoY. Its annualized earnings of H1FY20E was 12% lower than our estimates. ARBP needs to improve US growth in tandem with margin expansion, which were absent in H1FY20. Moreover, regulatory (USFDA) hangover on Unit-7 and 4 remained high as we are concerned over concentration risk of US revenues. The two plants contributed 44% of US revenues and 43% of pending ANDAs. Also, Unit-4 contributed 80% of US injectable, the major growth driver of US sales. With adverse observations of Unit-7 and ongoing lengthy audit at Unit-4, the regulation risk over the twoplants continues to be strong drag over valuation. We maintain ‘Hold’recommendation and maintain TP at Rs511.
Management guided for 40 new launches in next nine month in FY20E, which will drive the overall US revenue growth. ARBP expects significant growth opportunities from new injectable launches, scaling-up of existing business, and traction in OTC business. ARBP also expects ~20-30 ANDAs approvals in FY20. With robust product launches and scale-up in existing portfolio, we expect US generic business to grow ~15-16% CAGR over next two years.We maintain a BUY with a target price of Rs. 662.
Although existing businesses may not be affected by the warning letter issued(for Unit- XI), approval for future filings done from these plants couldget delayed. Moreover, remediation and site transfer-related costs and integration of acquisitions could stress the company’s margins in the near term. However, on the back of strong quarterly numbers, we maintain our earnings estimates for FY2020E and FY2021E. Weexpect the company to report sales and profit CAGRs of 29% and 22%,respectively, in the next two years. We feel the uncertainty related to regulatory hurdles at various units will weigh on the stock (until resolved successfully). We would like to monitor the sustainability of Q1 performance before taking a constructive view to upgrade the stock rating. Thus we maintain our Hold rating on the stock with an unchanged price target (PT) of Rs. 710.
In the US, the company continues to grow on new launches and injectables. The management expects strong growth in injectables and other new launches to drive US sales and margins. Acquisitions of Sandoz and spectrum augurs well as this offers a footprint in the derma and oncology branded segment in the US and in a way fills the portfolio gap. There will be significant debt addition nonetheless. However, looking at the broader picture of synergy and earlier history of successful acquisitions, we believe the company is well poised to manage this added burden. Aurobindo possesses one of the best enduring ecosystems among peers (vertically integrated model, lower product concentration). We arrive at our target price of | 735 based on 12x FY21E EPS of | 61.2.
Sandoz transaction closure expected shortly The key driver for APL henceforth will be the integration of Sandoz oral and dermatology business acquisition, which is expected to be the immediately earnings-accretive. As the acquired business from Sandoz includes some rapidly declining opportunities, timely closure of the transaction is critical. Earnings from the acquired operations are expected to decline over time, but in the meantime APL can aggressively invest in restructuring costs to ensure that the margins remain favourable. To ensure growth in the long run, APL continues to build and invest in capabilities in alternate dosage forms like respiratory inhalers, peptides, vaccines and depot injectables. In the near to medium term, incremental competition for Ertapenem generics is the key risk to earnings. We maintain Buy on the stock with a target price (TP) of Rs868 based on 16x March FY21E EPS.
ARBP currently trades at PE 12.9x of FY20E and 11.7x of FY21E. While valuation remains attractive for new investment, we believe ARBP to remain at discount vs. peers due to its large contribution from US and zero presence in India formulations. Currently, 1-year forward earnings from US values at PE 9-12x, similar to global peers while earnings from India formulations trades at PE 15-16x due to better risk-reward matrix. We maintain ‘BUY’, while decreases TP to Rs715 (with PE 14x of FY21E earnings) from Rs952.
Downgrade to Hold with downward revised PT of Rs 710. With a pattern emerging with the issues at all the API units, threat of warning letters for its other units cannot be ruled out. Although impact on existing businesses can be ruled out because of these developments, approval for future filings from these plants are likely to get delayed. Also, the remediation and site transfer related costs are likely to put the company’s near term margins under pressure. The company is considering site transfer as a precautionary measure. Thus we have revised downwards our sales/earnings estimates for FY2020/ FY2021 by 4%/13% and 7%/14% respectively. We expect the company to report sales and profit CAGR of 29% and 22%, respectively, over the next two years. The uncertainty related to regulatory hurdles at various units will weigh on the stock (until resolved successfully). Thus we downgrade our recommendation to Hold with downward revised price target of Rs 710.
We reduce FY20 EPS by 2% and FY21 EPS by 4% on the back of higher regulatory and other related costs and possible delay in some product launches. More than earnings, the impact will be higher on the sentiments. Accordingly, we reduce earnings multiple to 13x (from 15x) mainly due to regulatory overhang. We arrive at our new target price of Rs 705 based on 13x of FY21 EPS of 54.3.
we expect strong ramp-up in operating performance of Europe business – which has already achieved double-digit expansion in EBITDA margin – and healthy growth in the US business backed by new launches, ramp-up in injectable business (US$66mn in 4QFY19 vs. US$50mn in 2QFY19 and US$35mn in 4QFY18; FY18: US$163mn), strong products pipeline (138 pending for approval) and diversified product-mix. At CMP, the stock trades at a discount to its peers owing to higher leverage. Notably, ARBP has reduced core net debt by US$75mn in FY19 from earlier guidance of US$50mn. We maintain our BUY recommendation on the stock with a Target Price of Rs860.
To ensure growth in the long run, APL continues to build and invest in capabilities in alternate dosage forms like respiratory inhalers, peptides, vaccines, and depot injectables. In the near to mid-term, incremental competition in Renvela suspension generic and Ertapenem generics the key risk to earnings. We have updated our estimates to incorporate a delay in Sandoz portfolio integration which will have an impact on our FY20EPS. Based on our revised forecasts, we maintain Buy on the stock with a revised target price of Rs868 (from Rs866 earlier) based on 16x March FY21E EPS.
In the US, the company continues to grow on new launches and injectables. The management expects strong growth in injectables and other new launches to drive the US sales and margins. Acquisitions of Sandoz and spectrum augurs well as this offers a footprint in the derma and oncology branded segment in the US and in a way fills the portfolio gap. There will be significant debt addition nonetheless but looking at the broader picture of synergy and earlier history of successful acquisitions, we believe the company is well poised to manage this added burden. Aurobindo possesses one of the best enduring ecosystems among peers (vertically integrated model, lower product concentration). We arrive at our target price of | 850 based on 15x FY21E EPS of Rs 56.6.
The stock trades at PE 15x and 13x of FY20E and 21E, respectively and has a few inexpensive valuations among peers. With earnings growth of 19% in FY20E and 16% in FY21E, we believe that the prospect of the company in key markets along with visibility of pipeline (including acquired businesses/products) are not yet reflected in valuations, as compared to its peers. However, we believe that a large part of valuation gap was attributed due to lack in India formulations. Factoring lack of significant presence in India, we value ARBP at 20% discount to its peers and retain TP at Rs952 (PE 16x of FY21E). We maintain ‘Buy’
In another development, company’s Unit 16 has received 11 observations and was inspected from February 22- March 1’2019. This facility makes sterile products and the observations pertain to procedural lapses and not providing adequate training to employees, among others. Currently the unit does not contribute significantly and hence will not have a material impact on the numbers of the company. Since we have already built in the numbers the potential from the Injectable business we are not changing our estimates and maintain our Buy with a revised target of Rs 890.
We expect Aurobindo to report net revenue CAGR of ~22% & net profit to grow at ~19% CAGR during FY2018-21E, due to inorganic growth. Valuations of the company at 12.9xFY2020E are cheap V/s its peers and own fair multiples of 17-18x.We recommend a Buy rating on the stock.
SOURCE: Data from D'Market via Quandl. Intraday data delayed 15 minutes.
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