Strong US portfolio to drive revenue growth for Aurobindo Pharma

Margins expected to improve on product mix and volume growth

Aurobindo’s June quarter performance was in line with Street estimates, led by a steady growth in its US business. The geography, which accounts for 52 per cent of its revenues, posted a 16 per cent growth in revenue. 

Higher growth in oral solids and dietary supplements, which account for 80 per cent of the total revenue, bodes well for the firm. Though US revenues were better than estimates, growth on a sequential basis came in just under 4 per cent, pegged back by elective surgeries, which were postponed because of the Covid-19 pandemic. 

Revenue from the injectable segment, which accounts for 19 per cent of the total, was dented. Including tentative approvals, the company’s US formulations basket comprises 438 formulations, of which a fifth are high-margin injectables. 

Going ahead, analysts at ICICI Securities expect US revenues of the company to grow 14 per cent annually over the FY20-22 period, to Rs 14,925 crore. The growth is expected to be led by the launch of 50-60 products in FY21. The company ended FY20 with sales in this geography worth Rs 11,484 crore. 

 

 

While the US business, antiretroviral portfolio, and active pharma ingredient segments saw good growth in the quarter, the European business disappointed, with revenue falling 5 per cent YoY. The geography, which is the second largest for Aurobindo, accounting for 22 per cent of the sales, was impacted by higher stocking in the March quarter on account of the pandemic. 

Despite overall revenue growth, operating profit margins were flat as compared to the year-ago level because of higher employee costs and other expenses. While the gross debt level was at Rs 4,776 crore, net debt level fell sequentially to Rs 1,445 crore, and is expected to trend downward. 

Most brokerages are positive on the company’s prospects, which is led by a strong US portfolio, falling debt levels, and large integrated manufacturing that assumes more importance because of supply disruptions. While the stock has tripled from its March lows, analysts believe that it could see 10-15 per cent gains from these levels.