 "Aurobindo Pharma stock news: Analysts are bullish despite OAI to Eugia unit")
Shares of Aurobindo Pharma soared 2.5 per cent, hitting its fresh 52-week high of Rs 1,225 per share on the BSE in Tuesday’s intraday trade. However, in the last two trading sessions the stock has dipped by 0.5 per cent.
Aurobindo Pharma delivered a jolt of good news and bad to its investors last week on Saturday, the company while delivering handsome quarter four earnings for fiscal year 2023-24 (Q4FY24) also disclosed that the US FDA has given a official action indicated (OAI) status to its Eugia unit-III. An OAI status by the top US regulatory body signifies that regulatory or administrative actions are recommended.
However, the management has been upbeat in its commentary despite the Eugia unit-III setback. The management has guided for an earnings before interest tax depreciation and amortisation margin of 22 per cent for FY25 versus 20.1 per cent in FY24. The brokerages, too, have remained largely positive on its growth projections for FY25.
“While Aurobindo has OAI status on its Eugia Unit III, we infer multiple positives from earnings commentary. We believe Aurobindo’s revenue/Ebitdashall grow at 8 per cent/13 per cent CAGR with addition of Pen-G project, Vizag facility, stable price erosion, debottlenecking of the capacities and launches of products in the US/Europe” analysts at Nuvama Research wrote in a result update.
That said, the brokerage expects Aurbindo’s US revenue to reach $1.8 and $1.9 billion in FY25 and FY26 respectively. This revenue growth will be led by the US injectables business that may touch $500 million in FY26. Aurbindo’s US revenues stood at $1.7 billion in FY24.
Analysts say that despite OAI on Eugia unit-III, the company’s Vizag facility may play a back up for unit-III and for new ANDA filings contributing to growth in FY26.
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Shrikant Akolkar, Aashita Jain, and Gaurav Lakhotia of Nuvama Research retained their Buy rating on the stocks with a revised target price of Rs 1,400.
Those at Elara Capital expect 9 per cent constant currency growth in US business revenues of Aurobindo Pharma in FY25E. They believe that step-up in Revlimid revenue and the benefit from the recently approved Emflaza are likely to offset the impact of the OAI status given to its Eugia Unit 3.
Aurobindo’s biosimilars, penicillin G, biologics and CDMO business also form other growth drivers. The company's biosimilar business may contribute up to $300 million in revenues in to 2-3 years, while the biosimilar program may kickstart ANDA dilings by FY26, said analysts. The company has 14 biosimilar drugs presently in the pipeline with three filed with the European regulator.
That apart, some analysts are also cautious on the impact of regulatory challenges. “Following the OAI, we trim our FY2025-26E EPS by 3-4 per cent and expect a 12 per cent EPS CAGR for the company. At 17X FY2026E EPS, we believe growth from key initiatives, including complex filings, biosimilars and pen-G is captured. Hence, we downgrade the stock to SELL (from REDUCE) with an FV of Rs 980,” analysts at Kotak Institutional Equities wrote in a recent report.
On Saturday May 25, Aurobindo Pharma reported a 80 percent surge in consolidated net profit to Rs 909 crore for the Jan-March quarter of FY24, compared to Rs 508 crore reported in the corresponding period of the previous year.
The company's consolidated revenue was up 19 percent, reaching Rs 7,580 crore from Rs 6,473 crore in the same quarter a year ago. Furthermore, its Ebitda soared by 68 percent year-on-year to Rs 1687 crore, showcasing substantial operational efficiency.
The Ebitda margin for the quarter expanded to 22.3 percent from 15.5 percent in the same period a year ago, underscoring the company's strong performance and improved profitability.
At 10:27 AM; the stock of the company was up by 1.41 per cent at Rs 1212.45 per share. By comparison the S&P BSE Sensex was up by 0.22 per cent.