Aurobindo Pharma Q3 Earnings Review: Shares Rise As Analysts Bet On Growth Prospects
Aurobindo Pharma's net profit fell 19% year-on-year, missing estimates. Its revenue was up 7% at Rs 6,407 crore.
Analysts are betting on expected launches in the US and Europe, lower price erosion in the US, R&D investments in biosimilars, and Aurobindo Pharma Ltd.'s global injectables business after the third-quarter earnings.
Aurobindo Pharma's net profit fell 19% year-on-year, missing estimates. Its revenue was up 7% at Rs 6,407 crore, and Ebidta margins were at 14.9%.
Shares of the drugmaker gained 1.3% to Rs 476.50 apiece as of 10:18am on the Bombay Stock Exchange Ltd. This after the stock closed 6.4% higher on Friday after the earnings announcement.
Of the 32 analysts tracking the stock, 24 recommend a ‘buy,’ six suggest a ‘hold,’ and two rate a ‘sell,' according to Bloomberg data. The average 12-month price target implies an upside of 19.4%.
Here's what brokerages have to say about Aurobindo's Q3 FY23 results...
Motilal Oswal
Maintains a ‘neutral’ rating with a target price of Rs 500 apiece, implying an upside of 7%.
Delivered better-than-expected Q3 of FY23, led by healthy traction in the U.S., antiretrovirals, and Europe segments.
But earnings were below estimate—a 7% miss—due to higher depreciation/interest cost/tax outgo for the quarter.
The company remains on track with respect to product development in the biosimilar space.
Over the medium term, it is also witnessing a ramp-up in its global injectables business.
Raise the earnings estimate to factor in
a) the impact of a reduction in price erosion on the base business;
b) robust new launches in US/EU and
c) higher R&D spend on biosimilars
The company expects to launch g-Revlimid in Q3 FY24.
Pen-g project is expected to add business FY25 onwards.
The company has witnessed reduced price erosion in the US base business, and seasonality has supported some growth in US generics.
Company guided for mid-single digit year-on-year growth prospects in the Europe business over the next 12-15 months
The R&D spend has been higher for the quarter due to increased spending in clinical trials related to biosimilars.
This is expected to continue for a few more quarters.
Drugmaker expects commercialization from the Vizag facility FY25 onwards.
Aurobindo Pharma is in the process of building additional levers of growth such as the Pen-g project, a biosimilar pipeline, and niche products in the generics space (including injectables).
However, the earnings CAGR is expected to be moderate at 14% over FY23–25.
Centrum
Maintains a ‘buy’ rating with a revised target price of Rs 520 from Rs 600 apiece, implying an upside of 18%.
Ebidta missed estimates due to higher SG&A and staff costs.
US and Europe recovered sharply, API shown a decline.
Ex-injectable US business grew by 4% quarter-on-quarter, led by new launches.
Given the quarterly run-rate of $100 million for global injectable business, management aims to build $125 million (around Rs 1,000 crore) quarter-on-quarter in FY24.
Management guided margin to reach at 20% in near future led by new launches and continued growth run-rate in US.
As pricing and volumes in the U.S. are stable, expect further margin expansion in the coming years.
Pen-G project is on fast track with $ 100 million already spent and overall investment is expected to be $ 250 million.
The project has a market size of $250 million (around Rs 2,000 crore) and is expected to add business from FY25 onward.
On the biosimilar front, R&D spend has been higher for the quarter due to a ramp-up in spending for clinical trials related to biosimilars.
This is expected to continue for a few more quarters.
