Moneycontrol Bureau
Bank of America Merrill Lynch (BoAML) has maintained its buy rating on Aurobindo Pharma on expectations of strong 23 percent earnings per share (EPS) CAGR over FY16-18, especially after USFDA's successful inspection of unit IV plant at Andhra Pradesh and establishment inspection report for Penem facilities.
The company's management has indicated that the US Food & Drug Administration has successfully completed inspection of its unit IV plant at Andhra Pradesh, India. The FDA has issued 2-3 minor observations which should not impact the approval of pending products from the site as per the company.
"This is a positive development as Unit IV was the last major manufacturing site with an inspection pending in the near term, and Unit IV houses the manufacturing plants responsible for production of Injectables and Opthalmics - which will be the key growth driver for ARBP over the near-midterm," the brokerage house says.
In addition to Unit IV, Aurobindo's Penem facilities have also received establishment inspection report for recent inspections as per the management.
With this, most major manufacturing sites of the company has been inspected and cleared over the last 12 months, and as a result no major manufacturing location has an inspection pending over the near term, the brokerage house says.
BoAML believes this increases the visibility over the earnings and growth of the company as compared to most other peers who are still dealing with some or the other pending regulatory issue which is impacting their operations and/or approvals.
The brokerage says while oral solids is likely to sustain growth momentum in the US market over next few years even on this higher base, injectables portfolio of the company is likely to register stronger more than 30 percent CAGR over 2-3 years with ramp up in new launches including 9 in rest of FY17.
As per the company's latest update, unit IV also contained a brownfield extension for lypholized vials, clearance of which would now allow Aurobindo to successfully launch generic Vancomycin in the US market, for which the company has already received approval, BoAML says.Aurobindo has reported profit CAGR of 89 percent and revenue 33 percent during FY13-16. Active pharmaceutical ingredients business contributed 43 percent to revenue and formulations segment 57 percent in same period.
At 09:21 hours IST, the scrip of Aurobindo Pharma was quoting at Rs 810.80, up Rs 6.20, or 0.77 percent on the BSE.Posted by Sunil Shankar Matkar
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