Company Update | Pharmaceuticals
July 3, 2018
Aurobindo Pharmaceuticals
BUY
Aurobindo Pharmaceuticals is an India-based leading global generic
CMP
`619
company. It’s predominately formulations export company, with USA &
Target Price
`770
Europe contributing
~70% of sales (FY2018). Amongst the Indian
Investment Period
12 Months
Pharmaceutical companies, we believe that Aurobindo Pharmaceuticals is
well placed to face the challenging generic markets, given its focus on
S tock Info
S ector
P harmaceuticals
achieving growth through productivity.
Market Cap (` cr)
35,286
Well placed for challenging times in USA: Aurobindo has a robust pipeline
Net Debt (` c r)
3,277
Beta
1.1
(has filed 478 ANDA’s; second highest amongst Indian companies) & is
52 W eek High / L ow
809/527
investing to enhance its foray into complex generic (mainly injectables,
A vg. Daily V olume
54,388
Face Value (`)
1
ophthalmic etc.) & biosimilar, which will drive its next leg of growth. In the
BSE Sensex
35,038
Nifty
10,589
current price competitive market, company is well placed; given it’s vertically
R euters Code
AR BN.BO
integrated with 70% of raw material requirements being meet through
B loomberg Code
AR BN.IN
internally. In addition, almost no single product of the company contributes
S hareholding P attern (% )
than 3% of sales; unlike others peers, who have high product concentration.
P romoters
51.9
MF / Banks / Indian Fls
15.6
This is also evident from the performance of the company in USA in FY2018.
F II / NR Is / OCB s
18.6
Company expects pricing pressure to stabilize at +/- 5% yoy over the medium
Indian P ublic / Others
13.9
term. The company expects to launch ~30-40 products in the US, over the
Abs .(% )
3m
1y r
3y r
next six months, which will aid growth in the US business. Overall USA will
Sensex
6.3
13.6
26.0
Aurobindo P harma
8.1
(10.2)
(15.9)
grow at 12.7% CAGR over FY2018-20E.
Europe to grow steady, while ARV could provide extra boost: Europe, which is
another key region for the company, is expected to post CAGR of 12.0%
during FY2018-20E, while ROW is expected to post a CAGR of 20% during
same period. However, growth during the period would be more
predominate in the ARV segment, where company has confirmed tenders of
US$80-100mn to be executed over next two years.
Outlook and Valuation: We expect Aurobindo to report net revenue CAGR of
3-year price chart
~13% & net profit to grow at ~5% CAGR during FY2018-20E, due to
increased R&D expenditure. However, valuations of the company are cheap
1000
V/s its peers and own fair multiples of 17-18x. We recommend BUY rating.
800
Key Financials
600
Y/E March (` cr)
FY2017
FY2018 FY2019E FY2020E
400
Net sales
14,845
16,233
18,871
20,646
200
% chg
8.3
9.4
16.3
9.4
0
Adj. Net profit
2,302
2,423
2,685
2,650
% chg
13.7
5.3
10.8
(1.3)
EBITDA margin (%)
21.5
21.6
21.0
19.2
EPS (`)
39.4
41.5
46.0
45.4
Source: Company, Angel Research
P/E (x)
15.4
14.6
13.2
13.4
P/BV (x)
3.8
3.0
2.5
2.2
RoE (%)
27.6
23.0
20.9
17.4
RoCE (%)
23.1
20.6
19.6
17.8
EV/Sales (x)
2.6
2.4
2.0
1.8
EV/EBITDA (x)
11.9
11.1
9.6
9.3
Sarabjit Kour Nangra
Source: Company, Angel Research Note: CMP as of July 02, 2018
022-39357800 Ext: 6806
Please refer to important disclosures at the end of this report
1
Aurobindo Pharmaceuticals
Consolidated Profit & Loss Statement
Y/E March (` cr)
FY2016
FY2017
FY2018
FY2019E FY2020E
Total operating income
13,955
15,090
16,500
19,138
20,913
% chg
15.1
8.1
9.3
16.0
9.3
Total Expenditure
10,931
11,656
12,728
14,917
16,674
Net Raw Materials
6,162
6,434
6,753
7,737
8,362
Other Mfg costs
1,371
1,484
1,623
1,887
2,065
Personnel
1,543
1,768
2,131
2,450
2,818
Other
1,386
1,426
1,555
1,710
1,881
R&D
470
543
667
1,132
1,548
EBITDA
2,779
3,189
3,505
3,954
3,972
% chg
11.8
14.8
9.9
12.8
0.5
(% of Net Sales)
20.3
21.5
21.6
21.0
19.2
Depreciation& Amortisation
392
428
558
672
756
EBIT
2,386
2,762
2,947
3,282
3,216
% chg
10.8
15.7
6.7
11.4
(2.0)
(% of Net Sales)
17.4
18.6
18.2
17.4
15.6
Interest & other Charges
93
67
78
75
55
Other Income
205
121
105
105
105
(% of PBT)
7.5
4.0
3.2
2.9
3.0
Share in profit of Associates
-
-
-
-
-
Recurring PBT
2,744
3,061
3,241
3,579
3,533
% chg
23.2
11.5
5.9
10.4
(1.3)
Extraordinary Expense/(Inc.)
-
-
-
-
-
PBT (reported)
2,744
3,061
3,241
3,579
3,533
Tax
720.7
759.6
818.3
894.8
883.3
(% of PBT)
26.3
24.8
25.2
25.0
25.0
PAT (reported)
2,024
2,301
2,423
2,684
2,650
PAT after MI (reported)
2,025
2,302
2,423
2,685
2,650
Basic EPS (Rs)
34.6
39.3
41.4
45.9
45.3
% chg
25.1
13.7
5.3
10.8
(1.3)
July 3, 2018
2
Aurobindo Pharmaceuticals
Consolidated Balance Sheet
Y/E March (` cr)
FY2016
FY2017
FY2018 FY2019E FY2020E
SOURCES OF FUNDS
Equity Share Capital
59
59
59
59
59
Reserves& Surplus
7,229
9,313
11,622
13,993
16,333
Shareholders Funds
7,287
9,372
11,680
14,051
16,391
Total Loans
4,415
3,084
4,483
3,000
2,500
Deferred Tax Liability
(182)
(118)
76
76
76
Total Liabilities
11,546
12,362
16,297
17,129
18,969
APPLICATION OF FUNDS
Gross Block
Less: Acc. Depreciation
6,093
7,625
8,998
10,198
11,398
Net Block
2,186
2,614
3,172
3,844
4,600
Capital Work-in-Progress
3,907
5,011
5,826
6,354
6,799
Investments
310
310
310
310
310
Current Assets
812
971
1,968
1,968
1,968
Inventories
123
246
312
312
312
Sundry Debtors
269
338
343
343.32
399.12
Cash
10,294
9,206
12,188
13,247
15,096
Loans & Advances
834
513
1,262
547
1,202
Other Assets
831
409
10
10
10
Current liabilities
8,629
8,284
10,916
12,690
13,884
Net Current Assets
4,168
3,720
4,649
5,405
5,913
Deferred Tax Asset
6,127
5,487
7,539
7,842
9,182
Mis. Exp. not written off
-
-
-
-
-
Total Assets
11,546
12,362
16,297
17,129
18,969
July 3, 2018
3
Aurobindo Pharmaceuticals
Consolidated Cashflow Statement
Y/E March (` cr)
FY2016 FY2017 FY2018 FY2019E FY2020E
Profit before tax
2,744
3,061
3,241
3,579
3,533
Depreciation
392
428
558
672
756
Change in Working Capital
(1,333)
388
(1,298)
(1,018)
(629)
Interest / Dividend (Net)
205
121
105
105
105
Direct taxes paid
(721)
(760)
(818)
(895)
(883)
Cash Flow from Operations
877
2,996
1,577
2,233
2,671
(Inc.)/ Dec. in Fixed Assets
3
(1,532)
(1,374)
(1,200)
(1,200)
(Inc.)/ Dec. in Investments
103
123
66
-
-
Other Income
205
121
105
105
105
Cash Flow from Investing
311
(1,288)
(1,203)
(1,095)
(1,095)
Issue of Equity
Inc./(Dec.) in loans
552
(1,331)
1,398
(1,483)
(500)
Dividend Paid (Incl. Tax)
(171)
(171)
(171)
(314)
(310)
Interest / Dividend (Net)
(1,204)
(527)
(854)
(56)
(111)
Cash Flow from Financing
(823)
(2,030)
373
(1,853)
(921)
Inc./(Dec.) in Cash
365
(321)
748
(715)
655
Opening Cash balances
469
834
513
1,262
547
Closing Cash balances
834
513
1,262
547
1.202
July 3, 2018
4
Aurobindo Pharmaceuticals
Key Ratios
Y/E March
FY2016 FY2017 FY2018 FY2019E FY2020E
Valuation Ratio (x)
P/E (on FDEPS)
17.5
15.4
14.6
13.2
13.4
P/CEPS
14.7
13.0
11.9
10.6
10.4
P/BV
4.9
3.8
3.0
2.5
2.2
Dividend yield (%)
0.4
0.4
0.4
0.8
0.7
EV/Sales
2.9
2.6
2.4
2.0
1.8
EV/EBITDA
14.1
11.9
11.1
9.6
9.3
EV / Total Assets
3.4
3.1
2.4
2.2
1.9
Per Share Data (`)
EPS (Basic)
34.6
39.3
41.4
45.9
45.3
EPS (fully diluted)
34.6
39.3
41.4
45.9
45.3
Cash EPS
41.3
46.6
50.9
57.4
58.2
DPS
2.5
2.5
2.5
4.6
4.5
Book Value
124.5
160.1
199.6
240.1
280.1
Returns (%)
ROCE
22.9
23.1
20.6
19.6
17.8
Angel ROIC (Pre-tax)
26.5
27.4
25.3
24.3
21.6
ROE
32.5
27.6
23.0
20.9
17.4
Turnover ratios (x)
Asset Turnover (Gross Block)
2.3
2.2
2.0
2.0
1.9
Inventory / Sales (days)
100
101
113
106
110
Receivables (days)
107
89
65
65
65
Payables (days)
126
119
114
113
110
Working capital cycle (ex-cash) (days)
124
124
124
129
133
Source: Company, Angel Research
July 3, 2018
5
Aurobindo Pharmaceuticals
Research Team Tel: 022 - 39357800
DISCLAIMER
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have investment positions in the stocks recommended in this report.
Disclosure of Interest Statement
Aurobindo Pharmaceuticals
1. Analyst ownership of the stock
No
2. Angel and its Group companies ownership of the stock
No
3. Angel and its Group companies' Directors ownership of the stock
No
4. Broking relationship with company covered
No
Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors
Ratings (Returns):
Buy (> 15%)
Accumulate (5% to 15%)
Neutral (-5 to 5%)
Reduce (-5% to -15%)
Sell (< -15%)
July 3, 2018
6
