 "Aurobindo: Strong growth visibility led by US approvals")
Aurobindo Pharma at Rs 783.40 levels continues trading near its 52 week high of Rs 796 made in early August. The stock has given 17% returns in last three months post March 2015 quarter results when the company also announced a stock split. Notably there's more to come.
The street remains upbeat on company's US growth. Not only has it been seeing consistent growth led by the US, regular approvals for new launches in Oncology peptides and penem segments as well as investments in complex products as injectables etc is expected to drive growth in the coming days. In addition, Natrol's acquisition will drive US growth further while its European acquisition Actavis is likely to drive earnings growth from FY17.
For the quarter ending June 2015, US formulation sales at Rs 1,429.50 crore grew 28.1% y-o-y and 6.6% sequentially. This growth even made up for soft European sales that declined 7.1% y-o-y and 3.6% sequentially to Rs 741.7 crore, hit by currency headwinds. Exports to the US also drove the company’s exports that at Rs 1,776.7 crore at standalone level grew 11.2% y-o-y and 7.5% sequentially.
Aurobindo got eight approvals for new launches in June 2015 quarter and these should drive growth in the September 2015 quarter too. The ones in the injectables segment are being watched keenly.
During the June 2015 quarter, injectables revenues stood at $17 million. The company expects more approvals in the second half and total of about 20-22 approvals in FY16. The company has guided for 50% y-o-y revenue growth each in FY16 and FY17 from injectables and expects about $60-70 million in FY16 from this business.
Surjit Pal at Prabhudas Lilladher says that growth in valuation will be triggered with approvals of large products from Q4 FY16 onwards.
More From This Section
Analysts at Religare Institutional research say that off a high base, the US business may grow at a 20% CAGR over FY15-FY18 led by a rising share of complex generics in the product mix (from 8% in 2010 to 30% currently), a huge ANDA pipeline (176 pending ANDAs), strong growth in injectables/controlled substances and OTC penetration through the Natrol acquisition.
The European market, which contributes about 22% to revenues, is also like to see better growth in FY17 as its acquisition Actavis turns profitable, feel analysts.
Further, the company plans shifting 50% of manufacturing to India (only three products have been shifted till date) and commencement by FY17 to drive meaningful pick up in profitability with peak margins of 14-15% over medium term, say analysts at Reliance Securities.
The domestic business, which contributes 21% to overall revenues, is also seeing strong growth. It was 24.3% up y-o-y and up 7.5% sequentially to Rs 482 crore in June 2015 quarter.