Aurobindo Pharma is trading higher by 4% at Rs 426, extending its previous day’s rally, after the company has signed a binding offer to acquire the commercial operations, excluding the manufacturing assets, from Actavis in seven western European countries.
The stock currently trading at record high, has appreciated by nearly 11% in past two trading sessions from Rs 385 on the BSE compared to 1% rise in benchmark S&P BSE Sensex.
Analyst at Sharekhan maintains ‘Buy’ rating on the stock with a target price of Rs 470.
“Although, the acquisition may drag the operating profit margin by 150-200 basis points on day-one of the consolidation, we expect a fast recovery in the margin profile through cost rationalisation, site transfer of key products and improving margin on other products,” says analyst in a note.
As the acquisition would not disturb existing debt repayments and capex plans, we expect a favorable risk-reward ratio in two to three years perspective, he adds.
Actavis is estimated to generate nearly Euro 320 million (or Rs 2,704 crore) of revenues from its European operations but with an operating loss of Euro 20 million in 2013. The cost of acquisition would be slightly over Euro 30 million, Aurobindo Pharma said in a statement.
The stock currently trading at record high, has appreciated by nearly 11% in past two trading sessions from Rs 385 on the BSE compared to 1% rise in benchmark S&P BSE Sensex.
Analyst at Sharekhan maintains ‘Buy’ rating on the stock with a target price of Rs 470.
“Although, the acquisition may drag the operating profit margin by 150-200 basis points on day-one of the consolidation, we expect a fast recovery in the margin profile through cost rationalisation, site transfer of key products and improving margin on other products,” says analyst in a note.
As the acquisition would not disturb existing debt repayments and capex plans, we expect a favorable risk-reward ratio in two to three years perspective, he adds.
Actavis is estimated to generate nearly Euro 320 million (or Rs 2,704 crore) of revenues from its European operations but with an operating loss of Euro 20 million in 2013. The cost of acquisition would be slightly over Euro 30 million, Aurobindo Pharma said in a statement.