For 2QFY2019, Aurobindo Pharma (APL), the company posted sales of `4,667cr v/s. `4,354cr in 2QFY2018, a yoy growth of 7.2%. On the operating front, the EBITDA margin came in at 18.8% v/s. 23.8% in 2QFY2018. YoY decline is on the back of sales of certain high margin products in 2QFY18. Sequentially EBDITA margins expanded by ~340bp. Consequently, the Adj. PAT came in at `632cr v/s. `781cr in 2QFY2018, a yoy de-growth of 19.1%. We recommend our accumulate rating on the stock.

Outlook and valuation: We expect Aurobindo to report net revenue CAGR of ~20% & net profit to grow at ~17% CAGR during FY2018-20E, due to increased R&D expenditure. However, valuations of the company are cheap V/s its peers and own fair multiples of 17-18x. We recommend a Accumulate rating on the stock.

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