Blue Chip Pharma Stock Is Top Pick of The Week By Axis Securities: Here’s Why

With its headquarters located in Hyderabad, India, Aurobindo Pharma Limited (ARBP) is a comprehensive worldwide pharmaceutical enterprise. The corporation operates in over 150 countries and is involved in the research, production, and marketing of a broad variety of specialty pharmaceuticals, generic pharmaceuticals, and active pharmaceutical ingredients (APIs).

Aurobindo Pharma is present in more than 25 production and packaging facilities and is approved by several regulatory bodies, such as the USFDA, MHRA, EDQM, PMDA, WHO, Health Canada, MCC, and ANVISA. With a strong R&D infrastructure, the company's broad product portfolio is spread throughout seven key therapeutic/product areas: antiretroviral, cardiovascular, gastroenterological, antibiotics, anti-diabetics, anti-allergic and CNS (Central Nervous System). The brokerage firm Axis Securities has initiated a buy call on Aurobindo Pharma for a target price of Rs 1,185.

Reasons To Buy The Shares of Aurobindo Pharma According To Axis Securities

Strong Q3 Performance: Aurobindo reported EBITDA/PAT beat estimates by +1.7%/+12.6%. The company's consolidated revenue grew by 14.7%/1.8% YoY/QoQ and Gross Margins improved by 253bps/198bps YoY/QoQ. EBITDA margins improved by 689bps/275bps YoY/QoQ. This growth was primarily fueled by volume gains, stable demand, and new product launches. Aurobindo's diverse range of approved products has enabled it to effectively manage price erosion, maintaining a neutral impact overall.

New Expansion Plans: The Pen-G API and China plants are expected to begin commercialization in 1HFY25. 40-50% of ABRP' Pen-G API capacities of 15K TPA will be consumed internally and we expect ABRP' external Pen-G API sales to be $100/150 Mn in FY25/26 assuming pricing of $20/kg. The new China plant and the Vizag plant will help to scale up injectable supplies in the EU market and will aid to improve EU margins of mid-teens.

Biologics CDMO: The biologics contract manufacturing market is projected to reach a size of $30-40 Bn by 2030. Aurobindo is positioning itself in this growing market by establishing two 15KL bioreactors capable of handling both drug substance and fill-finish processes. The plant is scheduled to be commissioned in FY26, with revenue expected to commence in FY27. Additionally, negotiations between Aurobindo and MSD for the biologics CDMO contract are anticipated to be finalized by Mar'24.

Company Outlook: ABRP has several levers to grow its topline:1) Generic injectibles, Eugia (USD$520 Mn sales) may grow by low double- digit growth based on value-added approval, 2) The launch of Trastzumab biosimilars in H1FY25E, 3) The launch of Pen-G injectible in H1FY25E, and 4) One-time opportunity in gRevlimid in the next 2-3 years. Additionally, the base business of Oral Solids is expected to grow at a low single-digit rate with the introduction of 40 new products. EBITDA margins are projected to range from ~18% to 20%, attributed to changes in the product mix and a decrease in raw material costs.

Aurobindo Pharma Share Price Target

"We recommend a Buy the stock for a target price of Rs 1,185/ implying an upside of 10% from CMP," said the brokerage firm Axis Securities in a note.

Disclaimer

The recommendations made above are by market analysts and are not advised by either the author, nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.