l
BSE SENSEX
40,116
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Free float (%)
Aurobindo Pharma
CMP: INR433
TP: INR500 (+15%)
Buy
13 November 2019
2QFY20 Results Update | Sector: Healthcare
S&P CNX
11,840
ARBP IN
Sales uptrend continues led by US/Europe; regulatory
586
headwinds remain
253.9 / 3.5
Superior execution in US/acquisition contribution drive revenues:
Sales
838 / 428
were up 18% YoY to INR56b (our estimate: INR54.2b) in 2QFY20, largely led
-11/-41/-58
by the US (+27.3% YoY to INR28b) and Europe (+21.2% YoY to INR14b). New
1994
launches, higher sales in existing products and also sales from acquired
48.1
FY21E
296.6
63.2
36.1
61.7
31.3
340.2
19.9
13.3
7.0
1.3
Financials & Valuations (INR b)
FY19 FY20E
Y/E Mar
195.6
236.4
Net Sales
40.2
49.6
EBITDA
25.3
27.5
PAT
43.2
47.0
EPS (INR)
1.1
8.9
Gr. (%)
237.1
281.0
BV/Sh (INR)
19.8
18.1
RoE (%)
14.4
12.1
RoCE (%)
10.0
9.2
P/E (x)
1.8
1.5
P/BV (x)
Estimate change
TP change
Rating change
entity provided momentum during the quarter. Growth markets grew at a
subdued rate of 3.8% YoY to INR3b, while ARV/API sales were down
2.5%/1.3% YoY to INR2.4b/INR8b.
Reduced operating leverage hurts margins:
Gross margin expanded 70bp
YoY to 57.7% due to a favorable mix (product/geographical). However,
EBITDA margin shrank 80bp YoY to 20.8% (in-line) due to higher staff
cost/other expenses (+90bp/+100bp YoY). EBITDA grew 14% YoY to
INR11.7b (in-line). ARBP incurred a forex loss of INR272m in the quarter. Adj.
PAT increased marginally to INR6.7b (our estimate: INR6.3b) due to an
increase in the tax rate.
For 1HFY20, revenue/EBITDA/PAT were up 23%/28%/12% YoY at
INR110b/INR23b/INR12b.
Concall highlights:
(1) Substantial queries related to the Sandoz deal have
been addressed. Approval from FTC is likely in the next few weeks. (2) ARBP
is yet to get clearance from the USFDA for filing through the CB30 route for
Valsartan. (3) It is in process of sending a response with CAPA completion
w.r.t units 11, 1 and 9. (4) R&D spend to be 4-4.5% of sales for FY20. (5)
Eugia business prospects are likely to improve in FY21 led by new launches.
Valuation view:
We cut our EPS estimate for FY20 by 5% to INR47 to factor
in the delay in the closure of the Sandoz transaction. We reduce our P/E
multiple to 8x (prior: 10x) to factor in regulatory headwinds and revise our
TP to INR500 (prior: INR590) on a 12M forward earnings basis. While we
remain positive on ARBP based on the limited price erosion in the base
business and the robust ANDA pipeline (incl. complex generics), regulatory
issues may remain an overhang over the near term. Maintain
Buy.
(INR Million)
FY20E
2QE vs Est
54,195 3.3%
14.1
11,273 3.6%
20.8
2,500
650
150
8,273 9.3%
0
8,273 4.4%
2,027
24.5
-20
6,266 2.1%
6,266 6.8%
-5.5
11.6
Quarterly performance (Consolidated)
Y/E March
Net Sales
YoY Change (%)
EBITDA
Margins (%)
Depreciation
Interest
Other Income
PBT before EO expense
Forex loss/(gain)
Exceptional (expenses)/income
PBT
Tax
Rate (%)
Minority Interest
Reported PAT
Adj PAT
YoY Change (%)
Margins (%)
1Q
42,503
15.5
7,792
18.3
1,545
295
437
6,389
682
5,707
1,155
20.2
-3
4,555
5,095
-2.8
12.0
FY19
FY20E
FY19
FY20E
2Q
3Q
4Q
1Q
2Q
3QE
4QE
47,514 52,697 52,923 54,446 56,005 57,881 68,083 1,95,636 2,36,415
7.1
21.5
30.7
28.1
17.9
9.8
28.6
18.6
20.8
10,260 10,864 11,304 11,464 11,675 12,097 14,411
40,219
49,647
21.6
20.6
21.4
21.1
20.8
20.9
21.2
20.6
21.0
1,637 1,631 1,866 2,409 2,433 2,500 3,592
6,680
10,934
354
477
501
499
409
450
886
1,627
2,245
263
134
323
110
206
190
194
1,157
700
8,532 8,891 9,259 8,666 9,038 9,337 10,127
33,070
37,169
397
-505
28
-48
272
0
0
603
224
-268
-250 -1,062
-127
-128
-1,581
-255
7,866 9,145 8,169 8,587 8,638 9,337 10,127
30,887
36,690
1,754 2,048 2,311 2,278 2,244 2,428 2,618
7,269
9,567
22.3
22.4
28.3
26.5
26.0
26.0
25.9
23.5
26.1
-2
-26
4
-47
-1
-18
12
-29
-54
6,114 7,123 5,854 6,357 6,395 6,928 7,497
23,647
27,177
6,632 6,925 6,636 6,415 6,691 6,928 7,497
25,288
27,530
-15.1
5.5
22.6
25.9
0.9
0.0
13.0
1.1
8.9
14.0
13.1
12.5
11.8
11.9
12.0
11.0
12.9
11.6
Tushar Manudhane – Research analyst
(Tushar.Manudhane@MotilalOswal.com); +91 022 6129 1536
Hitakshi Chandrani – Research analyst
(Hitakshi.Chandrani@motilaloswal.com); +91 22 6129 1557
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.