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This 2nd Largest Bluechip Pharma Company Stock Is Down 45%, Should You Buy?

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Aurobindo Pharma, the second largest pharma company in India after Sun Pharma has seen its share price nosedive in the last few months. The stock is down more than 45% from 52-week highs of Rs 1063 and is currently trading at Rs 727.

 

Aurobindo Pharma: A large player in the pharma business

Aurobindo Pharma: A large player in the pharma business

Aurobindo Pharma is the largest generics company in the US (by Rx dispensed), according to the recent presentation by the company. The company is also the second largest amongst listed companies in terms of revenues. It has sizeable operations in India, US and Europe. It's global revenues in FY 2021 were a staggering $3.3 billion, showing robust global operations.

In fact, even in Europe the company is amongst top 10 generic companies in 7 out of 11 countries, where it has a presence.

Focusing on key growth drivers for the future
 

Focusing on key growth drivers for the future

Aurobindo Pharma will focus on key markets and key growth drivers in the coming years. The company aims to scale-up its injectables business and plans to to reach $650-$700 million of global injectable revenues by FY25. The company is seeking approval and launch of complex injectables with limited competition to drive growth.

Aurobindo is also looking a speciality products portfolio. In biosimilars, the portfolio comprises of 15 products, including both mammalian & microbial based products. For vaccines, the company has started phase III clinical trials for PCV, expected to compete by 1HFY23. For oncology, the company has filed 8 ANDAs, out of which 7 were injectables. It aims to file 10 ANDAs and launch 10 products in FY22.

Significant growth likely from focused areas

Significant growth likely from focused areas

As far as nasal sprays are concerned, the company plans to Commercialize 2 ANDAs in FY21 and has so far filed one ANDA in FY21, remaining six are under development. It also aims to file one ANDA in FY22 for nasal sprays. As fas as topicals are concerned, Aurobindo Pharma has a total of 33 ANDAs in the pipeline and has filed two ANDAs and 25 products are under development. The first clinical trial would start in FY22.

Valuations and view

Valuations and view

For the first quarter of FY 2022, Aurobindo Pharma reported a net profit of Rs 770 crores and an EPS of Rs 13.14. Going ahead we believe that by 2022-23, the company can report an EPS of Rs 60. The stock is barely trading at 12 times its 1-year forward earnings. Being a leading player in various areas of its operations, a clear focus on speciality products, low equity base and a consistent track record of growing its net profits, the stock is undervalued. Investors who can buy and hold for 2 to 5 years, for decent profits. The promoters holdings continue to be strong at over 51 per cent.

Apart from this, a sharp depreciation in the rupee could also boost profits and revenues.

Disclaimer

Disclaimer

Investing in stocks is risky. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article. Investors should exercise caution before investing.

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