Company Update | Pharmaceuticals

March 13, 2019

Aurobindo Pharmaceuticals

BUY

CMP

`773

USFDA Update

Target Price

`890

Aurobindo Pharmaceuticals (APL) has a big relief in form of Establishment

Investment Period

12 Months

Inspection report (EIR) for Unit-4 facility in which the USFDA has closed

issued Form 483. The Form 483 is issued to a firm's management at

Stock Info

the conclusion of an inspection when an investigator(s) has observed

Sector

Pharmaceuticals

Market Cap (` cr)

45,251

any conditions that may constitute violations of the Food Drug and

Net Debt (` cr)

2,579

Cosmetic (FD&C) Act and related Acts. USFDA had inspected Unit 4

Beta

1.1

52 Week High / Low

830/527

facility in December and issued Form 483, with two observations. Unit

Avg. Daily Volume

52,572

4 EIR is very important for the company, as it has filed totally 101

Face Value (`)

products from this facility of which 58 are approved by the USFDA (as

BSE Sensex

37,565

Nifty

11,301

on 31 Dec’2018). As on December’2018, the company had filed 519 US

Reuters Code

ARBN.BO

ANDA’s with 369 already approved.

Bloomberg Code

ARBP.IN

Shareholding Pattern (%)

Injectable segment, which contributes around 6-7% of sales (FY2018),

Promoters

51.9

MF / Banks / Indian Fls

17.7

is a key growth driver for the company expected to grow at 20-25% in

FII / NRIs / OCBs

20.6

the short to medium term. In addition, on the profitability front, the

Indian Public / Others

9.8

injectable business have ROE higher than the company business ROE

Abs.(%)

1yr

3yr

on an average 25-26%. The main reason behind the same is lack of any

Sensex

4.6

11.0

52.0

Aurobindo Pharma

3.6

33.0

5.5

big Indian player in the segment, which enables the main integrated

players to enjoy better profitability. Currently according to

Management, the segment in USA enjoys limited completion from 3-4

players. Thus, the approval of the facility is good relief for the

company.

3-year price chart

1,600

According to our interaction with the company, we have understood

1,400

1,200

that the company is building another complex injectable facility in

1,000

USA; which will in future de-risk its Injectable business. The facility will

800

be functional by end of FY2020.

600

400

200

However, in another development, company’s Unit 16 has received 11

observations and was inspected from February 22- March 1’2019. This

facility makes sterile products and the observations pertain to

procedural lapses and not providing adequate training to employees,

Source: Company, Angel Research

among others. Currently the unit does not contribute significantly and

hence will not have a material impact on the numbers of the company.

Since we have already built in the numbers the potential from the

Injectable business we are not changing our estimates and maintain

our Buy with a revised target of `890.

Sarabjit Kour Nangra

022-39357800 Ext: 6806

[email protected]

Please refer to important disclosures at the end of this report

Aurobindo Pharmaceuticals

Research Team Tel: 022 - 39357800

E-mail: [email protected]

Website: www.angelbroking.com

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Disclosure of Interest Statement

Aurobindo Pharma

1. Financial interest of research analyst or Angel or his Associate or his relative

2. Ownership of 1% or more of the stock by research analyst or Angel or associates or

relatives

3. Served as an officer, director or employee of the company covered under Research

4. Broking relationship with company covered under Research

Ratings (Returns):

Buy (> 15%)

Accumulate (5% to 15%)

Neutral (-5 to 5%)

Reduce (-5% to -15%)

Sell (< -15%)

March 13, 2019