Stock Broking firm ICICI Securities Limited is bullish on Aurobindo Pharma Limited (APL) and has given ‘ Strong Buy’ call for a time horizon of 12 to 15 months.
Current Market Price: Rs 191 on 9th Mar 2011
Target Price: Rs 257
Time Horizon : 12 to 15 months
Potential Upside : 34%
According to the Broking firm, the investors can buy the stock on dips with a 12 to 15 month target of Rs 257. Aurobindo Pharma, on account of its proven capabilities and huge capacities, is well equipped to cater to their incremental requirements. The stock has corrected sharply with the import alert imposed by the USFDA for the Unit VI facility. We believe this was an overreaction. We expect sales and adjusted PAT to grow at a CAGR of 17.0% and 19.9% to Rs 5720 crore and Rs 831 crore, respectively, in FY10-13E. We are initiating coverage on the stock with a STRONG BUY rating.
Valuations : APL is currently trading at a steep discount to its industry peers due to the recent melt down and legacy issues like API model and weak balance sheet. Despite the import alert for one facility, we believe other issues like transformation from API driven model to generic formulations, incremental capacity utilisation, monetisation of the growing ANDA pipeline and recent deals with leading MNCs will remain intact. We expect the valuation gap to narrow down, going forward. We value APL at Rs 257, based on 9x FY13E EPS of Rs 28.5.
Share’s Data :-
BSE Code : 524804
Mkt. Cap : Rs 5,385.35 Crores
Aurobindo Pharma Ltd. share’s CMP is Rs 190.60 on 14th Mar 2011.
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