Aurobindo Pharma can yield good returns of around 17 per cent from current levels, according to broking firm Motilal Oswal. The broking firm has a price target of Rs 980 on the stock of Aurobindo Pharma, as against the current market price of Rs 858.
"We tweak our EPS estimate for Aurobindo Pharma for FY21/FY22, factoring in increased R&D spending on complex products and higher other income from cash generated on account of sale of the Natrol business.
We expect a 12% earnings CAGR over FY20-23 (on a high base of FY20, including Natrol sales), led by new launches / increased market share in key markets (US/EU), 180bp margin expansion, and lower financial leverage. We value Aurobindo Pharma at 15x 12M forward earnings and arrive at a target price of Rs 980. We remain positive on ARBP's a) capability to build a niche portfolio, b) cost efficiency owing to the complete integration of manufacturing, and c) lower financial leverage. Maintain Buy," Motilal Oswal has said in its latest report
ARBP guided for annual capex of USD180-200m over the next 2-3 years. The capex is largely toward a) setting up an injectables facility for the US/EU market at Vizag, b) setting up capacity for inhaler/derma, c) API capacity expansion, and d) debottlenecking/maintenance.