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Axis Securities Report
Aurobindo Pharma Ltd.'s profit after tax stood above our estimates by 14%. Aurobindo Pharma's consolidated revenue grew by 25.8% YoY and gross margins improved by 122 basis points QoQ. Ebitda margins improved by 222 bps QoQ. The U.S. revenue at $ 409 million was up 7.1% QoQ.
Injectable businesses in the U.S. reported 2.5% QoQ growth, driven by strong underlying business growth as price erosion was negligible during the last quarter. Oral and over the counter business has driven growth in the U.S. by 7.2% and 12.3% QoQ respectively.
While European business de-grew by 3.7% QoQ, the growth markets grew by 16% QoQ. Antiretroviral drug optimisation sales increased by 31.6% QoQ to Rs 190 crore. Active pharmaceutical ingredient sales were up 12.98% QoQ at Rs 1,166 crore.
Outlook:
Aurobindo Pharma has a number of levers to grow its topline:
Generic injectibles, Eugia ($ 520 million sales) may grow by low double-digit growth based on value-added approval,
The launch of Trastzumab biosimilars in H2 FY24E,
The launch of Pen–G injectible in Q1 FY25E and
One time opportunity in gRevlimid in the next 2-3 years.
The base business – oral solids could grow to low single-digit growth based on the launch of 40 new products.
Ebitda margins could be in the range of ~ 18%-20% due to changes in product mix and fall in raw material costs. Therefore, we recommend a 'Buy' on the stock.
Key risks to our estimates and target price-
The U.S. Food and Drug Administration inspection and issuing of warning letter/official action indicated or 483 observations may impact the revenue growth.
Entry of new players may increase pricing pressure in the injectable portfolio.
Delay in launching biosimilars in the market.
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