DSIJ Mindshare

Aurobindo Pharma Posts Good Results

Aurobindo pharma has put up a fantastic show in its third quarter results of the current fiscal. Its consolidated net profit grew to Rs 91.81 against its loss in the corresponding quarter last fiscal. Its consolidated topline grew by 23% to Rs 1551.95 crore. The strong traction in growth was seen in its US business. The company has however removed 3 ANDAs during the quarter due to the non-viability from these products.

In its US business, the pharma company has seen a growth of 58% on a YoY basis. The growth is very high compared to the growth seen in the first nine months (9MFY13) at 43%. Its Anti-retroviral (ARV) business during the quarter has de-grown by 18.4% as the company is now focusing on the profitability of this segment, which contributes 11% to the company’s total revenues. For these nine months of the fiscal, revenues from ARV have declined by 7%. In Europe and rest of the world markets, the revenues grew moderately by 9.3%, which is lower compared to the growth of 26% seen in 9MFY13.

Among the other segments, Dossier’s income grew strongly by 69% to Rs 38.6 crore. Revenues from Active Pharma Ingredients were also up by 21% to Rs 660 crore.

Commenting on the performance, Aurobindo’s MD N. Govindarajan said that the company continues to see a hold in the performance, both in sales and earnings on a YoY basis. This belief is based on an improved business mix in formulations from new product approvals and launches in the US market. He said that during the quarter, USFDA cleared Unit-4 (general liquid injectable) after their first inspection and Unit-12 (SSP oral & injectable) on re-inspection and started approving products from these facilities. The new facility approvals will pave the way for consolidating injectable formulations business going ahead.

On the margin front, Aurobindo has seen a margin expansion of 160 basis points due to the improved business mix, which led to a decrease in materials cost to net sales by 4.8%. In sales terms, staff costs also declined by 0.3%. The rise in other expenses was offset by the increase in dossier income.

The company said that it has a total debt of Rs 3,250 crore of which 97% is in foreign currency form. The borrowing cost is 3.8%. It will reduce the debt by Rs 435 crore this year and then about Rs 500-600 crore every year starting from FY14, the management added.

It also said that the new facility approvals would be revenue incremental on Aurobindo, while expecting a huge boost from its injectable segment going ahead. The company has said that a 40% growth rate in the US revenues is likely next year.

The stock has shown a very strong recovery lately after it has re-hit profits. The major issue with the company seems to have ended and its unit VI approval is also in sight. This will further improve the sentiment on the stock. We would advise our readers to invest in the scrip with a two-year horizon and 30-40% price appreciation.

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