Aurobindo Pharma shares up 7% on Q4 earnings; analysts still miss estimates

Aurobindo Pharma shares were up 7 per cent on Tuesday as the drugmaker managed to meet analyst estimates on March quarter earnings. The analysts remained within the range of 600-720 in the range of the stock.

Aurobindo Pharma delivered a healthy 4 QFY 23, operationally in line with estimates, according to Kotak Institutional Equities. In FY 2024, the company has urged for improved traction in both oral solids and injectables. Coupled with moderation in input costs, Kotak expects to lead to a strong 310 basis points YoY expansion in Ebitda margin in FY24. In overall, we anticipate Aurobindo Pharma to deliver an EBITDA CAGR of 15 per cent over FY 2023 - 26. This brokerage sees Rs. 625 as a fair value for Aurobindo Pharma.

The shares rose 7.15 percent to reach a record high of 654.95 on the BSE.

Aurobindo reported in-line Q 4 FY23, said Nuvama Institutional Equities. The brokerage said the performance for the US region was in line and that emerging markets compensated for lower EU numbers.

Aurobindo Pharma's shares are trading at 13 times FY 25 E EPS. The risk associated with export-related headwinds is captured, but not the R&D monetisation monetisation. Nuvama has increased the target multiple times from 14 times on core EPS as prospects improve for generic players and has suggested a target of Rs 720 on the stock.

As demand grows, Aurobindo Pharma's growth prospects are becoming more realistic, with prices normalises and it benefits from drug shortages. Its investments in biosimilars, Pen-G, injectables and peptides should start contributing meaningfully from FY 25 and generate FCF from FY 26. We are raising FY24-25 E EPS by 4 per cent 8 per cent to factor in better industry prospects, the company said in a statement.

Motilal Oswal has a neutral opinion on the stock. The expansion prospects look encouraging for the next 2 - 3 years on better scope to garner US generics business, given its presence across the manufacturing value chain, regulatory-compliant facilities, and work-in progress to develop complex products. Motilal has a target of 600 rupees for the stock, since it feels the current valuation of the stock is appropriate for the upward trend in earnings.

Arihant Capital said Aurobnindo's US business is expected to grow between high-single digit and low-double digit, driven by specialty products, injectables and stability of the pricing environment for base generic products.

Revlimid launch will be an additional revenue contributor in FY24, followed by major Biosimilar launches in FY25 and FY26.

Operating margins are likely to grow in high teens in the near to medium term. Inputting in independent directors to address the problem of corporate governance. We have a positive view of the stock, said a broker at the company.