Aurobindo Pharma share price jumps 7% to 52-week high, up 40% this year; should you buy?
Aurobindo Pharma share price: The stock has risen as much as 40% this year. Aurobindo Pharma reported a 12.2 per cent year-on-year (YoY) fall in its Q4FY23 consolidated net profit at ₹505.9 crore. Its profit stood at ₹576.1 crore in the corresponding quarter a year ago.
PremiumAurobindo Pharma's share price jumped over 7 per cent to hit their fresh 52-week high of ₹654.95 in intraday trade on BSE on Tuesday (May 30). The stock opened almost flat at ₹611.25 against the previous close of ₹611.20 and rose to its one-year peak of ₹654.95.
The stock has been on a roll this year, rising nearly 40 per cent against a 3 per cent gain in the benchmark Sensex.
After market hours on May 27, Aurobindo Pharma reported a 12.2 per cent year-on-year (YoY) fall in its Q4FY23 consolidated net profit at ₹505.9 crore. Its profit stood at ₹576.1 crore in the corresponding quarter a year ago.
Consolidated revenue from operations stood at ₹6,473 crore in Q4FY23, registering a growth of 11.4 per cent from ₹5,809.4 crore in Q4 of the previous fiscal.
EBITDA before R&D stood at ₹1,412.9 crore in Q4FY23, rising by 0.5 per cent YoY and 3.2 per cent QoQ respectively. EBITDA margins came in at 15.5 per cent in Q4FY23, contracting as against 16.8 per cent in Q4FY22 but were up from a margin of 14.9 per cent in Q3FY23.
The stock fell 0.68 per cent in the next trading session on May 28.
Read more: Aurobindo Pharma Q4 results: Consolidated PAT dips 12% to ₹506 crore, revenue up over 11%
Most brokerage firms found the March quarter numbers of the company in line with expectations. Most of them retained their earlier views while some of them raised the target price.
Brokerage firm Prabhudas Lilladher has a buy call on the stock and raised the target price to ₹660 from ₹565 earlier.
The brokerage firm believes Aurobindo Pharma has multiple growth drivers in place with investments in vaccines, injectables, biosimilars and PLI which are expected to be reflected from FY24.
"Our FY24E and FY25E EPS (earnings per share) estimates stand increased by 6 per cent and 4 per cent, respectively, to factor in higher margins. Aurobindo Pharma’s Q4FY23 EBITDA of ₹1,000 crore (up 5 per cent QoQ) with an operating profit margin of 15.5 per cent (up 60 bps QoQ) was in-line with our estimate," said Prabhudas Lilladher.
The brokerage firm expects the margin trajectory to improve from FY24 as it believes pick-up in US sales hinges on timely niche approvals and stabilisation of pricing pressure in the base business.
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Kotak Institutional Equities maintained an 'add' call on the stock but raised the target price to ₹625 from ₹525 earlier. The brokerage firm also increased its FY2024-25E EPS by 1-4 per cent.
The brokerage firm said while the green shoots seen in the second half of FY23 are encouraging, upcoming complex launches may contribute meaningfully only from the second half of FY24. Nevertheless, given increasing pricing stability in oral solids and injectables within the US generics, amid a slew of planned new launches, Aurobindo Pharma’s medium-term demand outlook is improving.
"While we do not believe the current stability in the US generics pricing is structural, we do believe there is a case for a slight improvement in Aurobindo Pharma’s medium-term growth trajectory. Accordingly, we raise Aurobindo Pharma’s target PE multiple from 11 times to 12 times," said Kotak.
Brokerage firm Elara Capital recommends an 'accumulate' on the stock with a target price of ₹691, based on 15 times FY25E EPS of ₹43.9 plus cash per share of ₹32.
"The stock trades at 13 times FY24E core earnings. We see scope for improvement in valuation once earnings growth and cashflow pickup over FY24-25," Elara said.
On the other hand, Motilal Oswal Financial Services has a 'neutral' call on the stock with a target price of ₹600 even as it said Aurobindo Pharma delivered a better-than-expected operating performance in Q4FY23, driven by healthy growth in the US, European Union (EU) and rest of the world (ROW) formulation and API segments.
Motilal Oswal raised its FY24 and FY25 EPS estimates by 3 per cent and 4 per cent, respectively, to factor in (1) additional new business opportunities due to regulatory issues at peers, (2) limited competition product launches, and (3) better outlook on operational costs, particularly raw material and freight costs.
"Growth prospects look encouraging for the next two-to-three years on the back of (1) better scope to garner US generics business, given its presence across the manufacturing value chain, (2) regulatory-compliant facilities, and (3) work-in-progress to develop complex products. However, the current valuation adequately prices in the upside in earnings," said Motilal Oswal.
Disclaimer: The views and recommendations given in this article are those of the brokerage firms. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.
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