Aurobindo Pharma Ltd. – Committed to healthier life!
Aurobindo Pharma Ltd., established in 1986 and headquartered in Hyderabad, is a global pharmaceutical company focusing on generic pharmaceuticals, branded specialty pharmaceuticals, and active pharmaceutical ingredients (APIs). With a diverse portfolio and a strong international presence, Aurobindo serves key therapeutic segments across 150 countries, backed by extensive R&D capabilities.
Product Portfolio of AUROPHARMA
Aurobindo’s service segments include formulations and APIs. Its diverse product portfolio consists of biosimilars, dermatology, respiratory, vaccines, peptides, oncology, hormones, and sterile products.
Subsidiaries: Aurobindo boasts 85 subsidiaries, 6 joint ventures, and 2 associate companies, enhancing its global footprint and diversification efforts.
Growth Strategies of Aurobindo Pharma Ltd
- Diversification into injectables with a focus on EU and emerging markets.
- Expansion into untapped global markets like China.
- Clinical trial studies for biosimilar products.
- Strong focus on the domestic formulation market.
- Enhancing manufacturing capacity with specialized facilities:
- Commissioning a specialized injectable facility in Vizag to meet rising demand.
- Installation of the Lyfius plant for Pen-G and the 6-APA plant.
- Aggressive product expansion in the US market:
- Filed 7 ANDAs and received approval for 16 products in Q3FY24.
- Launched 21 products, including 4 specialty and injectable products.
Financial Highlights of Aurobindo Pharma Ltd
Q3FY24 Performance
- Revenue: Rs.7,352 crore (15% YoY increase).
- Operating profit: 68% YoY growth to Rs.1,601 crore.
- Net profit: Surged by 91% YoY to Rs.936 crore.
- EBITDA margin: 22% (highest ever).
- Gross margin: 57%.
Financial Performance
- Revenue and PAT growth: 15% and 30% respectively over the last twelve months.
- ROE & ROCE: Average of 14% and 16% respectively for FY18-23.
- Debt-to-equity ratio: 0.24, indicating a robust capital structure.
Industry Outlook
- Indian pharmaceutical industry poised to reach US$ 57 billion by FY25.
- Projected CAGR of over 10% to reach US$ 130 billion by 2030.
- Favorable regulatory environment with up to 100% FDI allowed for pharmaceutical projects.
- Increasing focus on research and development, with government allocation for research and healthcare.
- Growing emphasis on innovation and technology adoption to meet global healthcare demands.
Growth Drivers
- Government Allocation:
- Rs.3,201 crore (US$ 419.2 million) allocated for research.
- Rs.83,000 crore (US$ 10.86 billion) allocated for the Ministry of Health and Family Welfare in Union Budget 2022-23.
- Global Demand for Generic Drugs:
- Indian pharmaceutical industry projected to grow at a CAGR of over 10% to reach US$ 130 billion by 2030.
- India supplies over 40% of generic demand in the US.
- Cost Advantage and Efficient R&D:
- India offers medicines at costs 30%-35% lower than the US and Europe.
- R&D costs in India are approximately 87% less than in developed markets.
Competitive Advantage
Compared to competitors like Lupin Ltd, Mankind Pharma Ltd, etc, Aurobindo Pharma Ltd has the following advantages
- Undervalued stock with potential for P/E expansion.
- Strong margin and earnings growth compared to competitors like Lupin Ltd. and Mankind Pharma Ltd.
Outlook
- Aurobindo is poised for robust growth amidst US drug shortages.
- Diverse product portfolio meets market needs.
- Targeted FY24 EBITDA margin: 20%.
- New facilities in China and Vizag enhance market presence.
- Pipeline includes high-margin biosimilars and peptides.
- Strategic initiatives ensure sustained success.
Valuation
- Aurobindo Pharma Ltd. is positioned for growth amidst heightened drug shortages, particularly in the US market.
- With its expansion initiatives and optimization of product mix, Aurobindo Pharma Ltd. is poised to capitalize on market opportunities, warranting a BUY rating with a target price (TP) of Rs.1,361 by 28x FY25E EPS.
Risks
- Forex Risk: Exposure to forex fluctuations due to significant operations in foreign markets.
- Regulatory Risk: Vulnerability to regulatory changes, especially scrutiny by agencies like USFDA, impacting operations.
Recap of our previous recommendations (As on 03 May 2024)
