Aurobindo stock at new high, up 5% as board to consider buyback on July 18

In the past one year, the stock has zoomed 89 per cent, as compared to 21 per cent rally in the BSE Sensex.

Shares of Aurobindo Pharma hit a new high of Rs 1,394, as they rallied 5 per cent on the BSE in Monday’s intra-day trade after the company said its board will meet on Thursday, July 18, 2024 to consider a proposal for buyback of the fully paid-up equity shares of the company.

The stock of pharmaceutical company surpassed its previous high of Rs 1,343.85 touched on July 10. At 10:04 am; Aurobindo was trading nearly 3 per cent higher at Rs 1,363.90, as compared to 0.09 per cent gain in the BSE Sensex.

Thus far in the calendar year 2024, the stock has rallied 29 per cent, as against 11.5 per cent rise in the benchmark index. In the past one year, the stock has zoomed 89 per cent, while, the BSE Sensex rallied 21 per cent.

In an exchange filing, Aurobindo Pharma said, a meeting of the board of the company will be held on Thursday, July 18, 2024 to consider, inter alia, a proposal for buyback of the fully paid-up equity shares of the company and the matters necessary and incidental thereto.

A buyback is a company's purchase of its outstanding shares. Buybacks reduce the number of shares available in the open market. The companies usually buy back shares of their company to increase the value of the remaining stocks by reducing the supply of them.

Aurobindo is principally engaged in manufacturing and marketing of active pharmaceutical ingredients, generic pharmaceuticals and related services.

Meanwhile, Nuvama Institutional Equities has a ‘Buy’ rating on Aurobindo with a target price of Rs 1,400 per share. Analysts believe Aurobindo’s revenue/EBITDA shall 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.

“We are upgrading FY25E/26E EPS by 10 per cent/13 per cent and building in EBITDA margin of 21.9 per cent/22.3 per cent. We are positively taking note of recent addition of two new independent board members,” the brokerage firm said in the Q4 result update.

According to analysts at Elara Capital, Aurobindo’s penicillin-G project may start contributing significantly in H2FY25; a scale-up in the manufacturing process is underway. Our analysis shows it may contribute ~USD 300mn revenue in the 2-3 years. 

The biosimilars program may be another major growth driver in the medium term; there are already 14 products in the pipeline with three filed with the European regulator. The US FDA filings for biosimilars will also kickstart in FY25. Biologics’ (CDMO) may be another growth driver in the next 3-4 years. The recently announced partnership with MSD is a strong start, we believe, the brokerage firm said in its stock update. The stock today topped the brokerage firm’s target price of Rs 1,384 per share.