Aurobindo Pharma Limited Q1 FY 2023 Research Tear Sheet

Stock Data

Ticker: AUROPHARMA

Exchange :NSE and BSE

Industry: Automobile

Price Performance

Last 7 days    4.36%

YTD                 -19.19%

Last 12 months     -28.17%

It will be beneficial to invest in the stocks of Aurobindo Pharma. The company enjoys a  healthy ROE of 21.49% ROE which is an  important financial parameter. The company has a good operating margin of 26.04 % which is a good sign for profitability. The EPS has grown 65.86 % which is good for the company. The Debt to Equity ratio of 0.25 , is a strong indication for the company.Hence it will be beneficial to invest in this stock.

Investment Thesis

Key Financial Highlights–

Rs Crores	Q1FY23	Q1FY22
Revenue from operations	6,235.90	5,702.00
Gross Profit	3,349.20	3,335.80
EBITDA	964.7	1,209.40
Net Profit	520.5	770

Revenue from operations stood  at Rs 6,235.9 crore, increased by 9.4% QoQ. Research & Development (R&D) spend stood at Rs 310 crore, which constitutes 5% of revenue. EBIDTA before Forex and Other income stood at Rs 964.7 crore. The EBITDA margin is 15.5%. The Net Profit stood at Rs 520.5 crore. The Basic & Diluted EPS is Rs 8.88 per share.

Revenue Analysis on Segments- The revenue from US increased by 10.8% YoY and 8.9% on QoQ basis to Rs. 2,971 crores. The Europe revenue declined by 2.2% YoY to Rs 1,548 crore. The Revenue from Growth Markets increased by 30.8% YoY and accounted for 6.9% of revenue. The ARV revenue increased by 28.1% YoY to Rs 380 crore and accounted for 6.1% of revenue.  The API business earned revenue of Rs 906 crores,  increased 11.6% YoY and contributed14.5% to the consolidated revenues.

Shareholding Pattern in Percentage

The promoter holdings remain unchanged at 51.83% for Q1 FY23. As on last quarter the promoters pledge was 0.92% of shares. The total pledge stood at 14.97%.

Company description–  Aurobindo Pharma Limited is an Indian pharmaceutical company. It was established in the year 1986. The founders include Mr. P.V. Ramprasad Reddy, Mr. K. Nityananda Reddy and a small group of highly committed professionals.The company started its operation in the year 1988-89 with a single unit manufacturing Semi-Synthetic Penicillin (SSP) at Pondicherry.

The company is mainly focused on R&D and innovation. Aurobindo Pharma ranks second in India in the Pharmaceutical Industry. 90% of revenues is derived from international operations. The company has its presence in 150+countries. It mainly deals with generic drugs, over-the-counter drugs, vaccines, diagnostics, contact lenses and animal health. The vision of the company is “to become a leading and an admired global pharma company, ranked in the top 25 by 2030”.The key management personnel include K Nithyananda Reddy, Vice Chairman & Managing Director and K Ragunathan, Non Executive Chairman.

Product Portfolio– The product portfolio includes Formulations, Custom Synthesis, Peptides, Aurozymes, R&D and API.

Company Strategies– The company focuses on R&D. It has 5 R&D centres spread over 16000 square meters. It has 3 R&D centres in the USA with 1700+ scientists & analysts. It has world class talent and it has launched multiple affordable products across multiple Therapeutic areas.

Regulatory Approvals– The company has filed 13 ANDAs including 4 injectables with USFDA in Q1 FY23. It has received final approval for 10 ANDAs including 4 injectables in Q1FY23. The company has launched 7 products including 5 Injectables during the quarter.

The Securities and Exchange Board of India (SEBI) has issued a warning letter to Aurobindo Pharma for disclosing very limited information to the stock exchanges about an USFDA audit of the company’s active pharmaceutical ingredients manufacturing facility (API) in Hyderabad.

Industry Analysis –According to the Indian Economic Survey,  India’s domestic pharmaceutical market is expected to reach US$ 65 billion by 2024 and further expected to reach US$ 120-130 billion by 2030.Even the pharmaceutical export sector had a massive growth. It grew by almost $10 billion in 8 years. The pharmaceutical industry is adopting technologies like AR/VR, artificial intelligence (AI), machine learning 3 D printing for further development. The digital intervention has improved patient care, timely treatment, supervision, cost-effectiveness, drug development, Quality Affordability & Accessibility of medicines.

Inherent Strengths- Aurobindo Pharma products have strong brand recognition in the pharmaceutical market. It has wide diversification of products with domestic and global presence. It has a strong  market leadership position in the Major Drugs industry. 

Merger & Acquisitions-Aurobindo Pharma acquired a 51% stake in Hyderabad-based GLS Pharma for a cash consideration of Rs 28.05 crore. This will expand the foothold of the company in oncology business in the domestic market.

Aurobindo Pharma has acquired Hyderabad based firm Veritaz Healthcare for Rs 171 crore. This acquisition will help Aurobindo Pharma to launch marketing biosimilar and other products in India.

Peer comparison-

Company Name	MCap(Cr)	TTM PE	P/B	ROE(%)
Aurobindo Pharma	34,772.53	13.13	1.41	10.77
Sun Pharma	2,19,167.25	56.35	4.29	6.81
Cipla	82,890.23	33.05	3.92	12.07

From an investor perspective, Aurobindo Pharma has a very good P/B ratio compared to Sun Pharma & Cipla. It also gives ROE so the stocks will be a good choice for investment.

Our View- The company enjoys a good P/E ratio. It should concentrate more on improving the CAGR Return which is 0.5% in the last 3 years. It should concentrate more on product diversification and R&D.