Aurobindo Pharma, Shree Cement, Star Cement, Ramco Cements, Metropolis, GSPL Q2 Result Review: HDFC Securities

HDFC Securities Institutional Equities

Aurobindo Pharma - Muted Q2; scale-up in injectable and margin is key

Ebitda (+12% YoY) was 5%/7% below our/consensus estimates as 8% sales growth (-1% QoQ US, +19% EU, and +49% YoY in growth markets) and higher gross margin (+366 bps YoY) were offset by higher staff/selling, general and administrative /research and development costs (+16/ +14%/ +35% YoY). Aurobindo Pharma Ltd. expects-

1. steady growth in the US oral solid, led by new launches and volume gain,

2. specialty/injectable to see recovery QoQ with supply normalization from its Eugia unit 3 by Q4 FY25 (hope to achieve global sales of ~$600 million in FY25),

3. EU sales at Euro 900 million on new launch visibility,

4. Ebitda margin of 21-22% in FY25 (20.7% in H1) on recovery in injectables and Pen-G plant scale-up led leverage,

5. R&D quarterly rate to remain elevated to ~Rs 4+ billion for next three-four quarter; (~5% of sales), and

6. tax rate at ~30% in FY25 (versus 27-28%).

Accordingly, we have cut our EPS by 7/3% for FY25/26E and rolled forward the target price to Rs 1,440 (19 times Q3 FY27E versus 20 times Q1 FY27E). ADD stays, given steady growth visibility (US/EU), margin improvement, and monetization of R&D assets (biosimilars, respiratory, and specialty).

Shree Cement - Focus on margin over volume

We maintain our ADD rating on Shree Cement Ltd., with an unchanged SOTP target price of Rs 26,700/share. During Q2 FY25, Shree volume declined 7% YoY as it focused on trade sales while non-trade demand was weak. Cement net sales realisation fell only 0.4% QoQ, lower versus peers owing to rise in trade sakes QoQ.

Unit opex went up 2% QoQ, mainly on operating leverage loss. Thus, unit Ebitda fell Rs 170/metric tonne QoQ to Rs 780per MT (down Rs 280/ MT YoY.

Fuel cost is expected to gradually cool off by 12% from Q2 FY25 levels in the next three quarter. The company expects capex of Rs 40 billion each year for the next four year. Management plans to commission 14 million metric tonne cement capacity in Q1 FY26 to reach 70 million metric tonne.

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