Shares in Aurobindo Pharma have fallen sharply from highs of Rs 1063 to the prevailing price of Rs 693. The downtick over the past few months has been almost 34%. This is even as the markets have been gradually rising over the last few quarters.
Large players in the pharma business
Aurobindo Pharma is a large player in the pharma industry. It is the second largest player in the pharma industry in India and the largest generics Company in the US (by Rx dispensed).
There are some other factors that worked in the company's favour. The company also has a high level of vertical integration; around 70% of API requirement is manufactured in-house. Apart from this, Aurobindo Pharma also has a low product concentration in its mail US market, so it is not reliant on a few products to generate robust business.
In fact, the top 25 products account for less than 35% of US business, which means the company has hedged its risks and dependence on select products only.
Growth outlook remain robust
One of the key areas for growth would be the ANDA filings. The company has a significant number of ANDAs that are in the final stage of approval. This would mean that there would be robust growth and addressable market in the future.
Also, the company is focused on majority of the R&D investments that are directed towards complex and specialty products. Revenues from specialty products include things like Biosimilars, Vaccines, Inhalers etc. There are aggressive plans to scale up the injectibles business.
The company aims to reach $650-$700 mn of global injectable revenues by FY25. Aurobindo Pharma has also approval and plans to launch of complex injectables with limited competition to drive growth.
Should you buy the stock of Aurobindo Pharma?
The company also has a strong balance sheet with net cash position, which should help it to capitalise on opportunities inorganically. The company for FY 2022-23 can report an EPS of Rs 60.
This means that the p/e would be around 12 times projected EPS, which is not bad for a fast growing company. Apart from this we have seen a significant fall in the Indian rupee, which should also benefit Aurobindo Pharma.
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