Aurobindo Pharma is our top pick: Citi

Our Bureau Updated - December 07, 2021 at 02:28 AM.

ICICI Securities, Religare too have positive calls

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Shares of Hyderabad-based Aurobindo Pharma remained active on the bourses on Friday, after the company on Thursday said it has received approval from the US regulator to market generic Entecavir tablets.

Target price ₹1,120

Foreign brokerage firm Citi has maintained a ‘buy’ call on Aurobindo Pharma with a target price of ₹1,120 a share.

The stock, after touching a high of ₹780, closed at ₹756.40 on the NSE, against the previous day’s close of ₹745.35. Of the 36.66 lakh shares traded on the NSE, 46.3 per cent (16.98 lakh shares) were presented for delivery.

Citi expects the generic Entecavir ($285-million market) to be a potentially chunky and sustainable product for Aurobindo. “It is only the third generic company (after Teva and Par) to get approval for this product and we do not see too many additional competitors in the near future. This should keep price erosion and profitability at attractive levels,” Citi said.

Citi says revenues could ramp up meaningfully over the next few years and maintains Aurobindo Pharma as their top pick.

USFDA nod

The company has received final approval from the US Food and Drug Administration to manufacture and market Entecavir tablets in strengths of 0.5 mg and 1mg.

Domestic broking firm Religare expects the US business to grow at a 20 per cent CAGR over FY15-18 led by a rising share of complex generics in the product mix (to the current 30 per cent from 8 per cent in 2010); a huge ANDA pipeline (176 pending ANDAs); strong growth in injectables/controlled substances; and OTC penetration through the Natrol acquisition.

Aurobindo Pharma’s consolidated net profit rose 7 per cent at ₹432 crore in the first quarter ended June 30, compared with  ₹404 crore in the corresponding quarter of the previous year.

Revenue increased 5 per cent at ₹3,320 crore, compared with  ₹3,162 crore in the year-ago period.

With the USFDA expected to hasten the approval process (90 per cent of approvals by September 2017) for other products too, companies such as Aurobindo will stand to benefit the most, said ICICI Securities, which maintained a ‘buy’ rating with a price target of ₹860.

The company in July had rewarded its shareholders with a 1:1 bonus issue.

Published on August 28, 2015 15:39