USFDA lifts the import alert on Unit VI of Aurobindo Pharma

India Infoline News Service | Mumbai |

APL, in the past one year has witnessed many highs and lows led by USFDA clearance uncertainties and setbacks at the operational front.

CMP Rs138, Target Rs218, Upside 58%

  • As per the USFDA website they have lifted the import alert for non-sterile products manufactured in its UNIT-VI cephalosporin facility based in Hyderabad.
  • The approval will pave the way for resumption of exports of 9 products to the US market. The import alert was earlier imposed in February 2011. Prior to import alert the Unit was having annual US sales of US$33mn for the said products.
  • Aurobindo Pharma (APL), in the past one year has witnessed many highs and lows led by USFDA clearance uncertainties and setbacks at the operational front. Now, with USFDA approval Unit IV and along with Unit VI and improvement at operating front, we believe a re-rating is just around the corner.
  • APL has a twin benefiting business model. APL has tied up with MNCs partners for selling and distribution in various countries (out licensing the dossiers). Additionally, it has its own distribution given that all the molecules are not exclusively licensed. While the strategy augurs well for better business mix in the long run, it will stress the balance sheet with higher working capital in the near term.
  • We expect continual improvement in fundamentals driven by new Unit IV approval resolution of US FDA issues of Unit VI, better business mix and tight control at operating level. APL is currently trading at a deep discount to its peers and even to its historical PE multiple of ~12x (6 yrs avg). We expect valuations to catch up on improving outlook.  We maintain BUY with a 9-12 month TP of Rs218.
Financial summary
Y/e 31 Mar (Rs m) FY12 FY13E FY14E FY15E
Revenues 46,521 54,884 65,163 77,666
yoy growth (%) 4.5 18.0 18.7 19.2
Operating profit 5,860 9,206 11,223 13,340
OPM (%) 12.6 16.8 17.2 17.2
Adj PAT 3,114 4,429 6,013 7,665
Reported PAT (1,235) 4,429 6,013 7,665
yoy growth (%) (45.7) 42.2 35.8 27.5
         
EPS (Rs) 10.7 15.2 20.7 26.3
P/E (x) 12.9 9.1 6.7 5.2
Price/Book (x) 1.7 1.5 1.2 1.0
EV/EBITDA (x) 11.1 7.0 5.7 4.6
Debt/Equity (x) 1.1 0.9 0.7 0.6
RoE (%) 13.0 17.4 19.8 20.8
RoCE (%) 8.3 13.5 16.0 17.7
Source: Company, India Infoline Research
 

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