Aurobindo Pharmaceuticals (APL) has acquired dermatology and oral solids businesses from Sandoz Inc., USA for an upfront purchase price of US$0.9bn in cash. With this acquisition, Aurobindo adds sales of US$0.9bn and would become the 2nd largest generic player in the US by number of prescriptions. Acquisition is funded by debt and values the acquired company at 1.0xEV/sales, which we believe given the size and scope of the business acquired is very attractive. The
transaction will lead to net debt to Equity reaching almost 0.6xFY2020E numbers and fully reflect in the FY2021 financials. The acquired business, as guided by the Management has EBDITA margins in line with APL (20-22%), making the deal attractive in terms of payback also. Transaction is expected to be accretive to normalized EPS from first full year of ownership and will augment the net profit growth by 20% on a full year basis. We maintain a Buy with a revised target of `870.

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