Aurobindo Pharma shares jumped 7% today. Here're price targets for stock

Shares of Aurobindo Pharma jumped 7 per cent in Tuesday's trade, as the drug maker managed to meet analyst estimates on March quarter earnings. Analysts targets on the stock stayed in the Rs 600-720 range.

Aurobindo Pharma delivered a healthy 4QFY23, operationally in line with estimates, said Kotak Institutional Equities. The company has guided for improved traction in both oral solids as well as injectables in FY2024. Coupled with moderation in input costs, Kotak expects this to lead to a strong 310 basis points YoY expansion in Ebitda margin in FY24. Overall, we expect Aurobindo Pharma to deliver an Ebitda CAGR of 15 per cent over FY2023-26. This brokerage sees Rs 625 as fair value for Aurobindo Pharma.

The stock rose 7.15 per cent to hit a high of Rs 654.95 on BSE.

Aurobindo reported in-line Q4FY23, said Nuvama Institutional Equities. The brokerage said that the performance for the US region was in line and that emerging markets compensated for lower EU numbers.

Aurobindo Pharma is trading at 13 times FY25E EPS. This captures the risk associated with export-related headwinds, but not the R&D monetisation. Nuvama has increased the target multiple to 15 times from 14 times on core EPS as prospects improve for generic players and has suggested a target of Rs 720 on the stock.

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"Aurobindo Pharma's growth prospects are improving as demand increases, pricing normalises and it benefits from drug shortages. Its investments in biosimilars, Pen-G, injectables and peptides should start contributing meaningfully from FY25 and generate FCF from FY26. We are raising FY24/25E EPS by 4 per cent/8 per cent to factor in better industry prospects," it said.

Motilal Oswal has a neutral stance on the stock. Growth prospects look encouraging for the next 2-3 years on better scope to garner US generics business, given its presence across the manufacturing value chain, regulatory-compliant facilities, and work-in-progress to develop complex products. Motilal has a target of Rs 600 on the stock, as it feels the current valuation adequately prices in the upside in earnings.

Arihant Capital said Aurobnindo's US business is expected to grow between high-single digit and low-double digit, driven by specialty products, injectables and stabilization of pricing environment for base generic products.

Revlimid launch will be additional revenue contributor in FY24, followed by major Biosimilar launches in FY25 and FY26, it said.

"Operating margins are likely to expand in high teens in the near to medium term. It has tried to address corporate governance issue through induction of independent directors. Factoring in the above drivers, we have a positive view on the stock," the brokerage said.

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