Aurobindo Pharma Q3 Results Review - Niche Products Led Earnings Growth: Motilal Oswal

Motilal Oswal Report

Aurobindo Pharma Ltd. delivered better-than-expected Q3 FY24 performance. The increased contribution from niche products in the U.S. generics segment and steady traction in the Europe segment enabled better profitability for Aurobindo Pharma in Q3 FY24.

Post  United States Food and Drug Administration inspection at Eugia Unit-3, Aurobindo Pharma is implementing various measures to not only address the issues highlighted by USFDA, but also maintain compliance.

We increase our earnings estimate by 3% for FY25/FY26 to factor in

1. Cost savings due to captive consumption of Pen-G,

2. Enhanced profitability of EU business.

However, this increase will be partly offset by

• Temporary reduction in business from Eugia Unit-3. We value Aurobindo Pharma at 16 times 12 months forward price-to-earning to arrive at a price target of Rs 1,080.

The company is working on multiple fronts –

1. Strengthening abbreviated new drug application pipeline,

2. Building biosimilar portfolio,

3. Capex under production linked incentive scheme to enhance sales as well as earnings growth.

Accordingly, we factor 17% earnings over FY24-26. We reiterate our 'Neutral' stance on the stock on limited upside from the current levels

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