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Major hangovers are easing, other things are in place, too, and the drugmaker will become a net cash company for fiscal year 22. Analysts are largely projecting more upside for the stock.
The stock is Hyderabad-based Aurobindo Pharma.
The rapid rebound in stocks has faced a 4% rise in Sensex in the past month. What fueled the sentiment at the counter was the recent inspection report from the USFDA facility, which classified the company’s injectable formulation facility, Unit IV, as VAI or stated voluntary action.
The margin profile of the injectable segment is said to be higher than the company average. There are hopes of an early resolution at the other three plants that are under the radar of the USFDA.
Calling the end of the regulatory cycle, Kotak Institutional Equities said the new USFDA move appears to have been helped in part by continued growth in demand and a shortage of products in the US. USA For injectable critical care products as directed by their peers.
With Unit X and Eugia also cleared, almost 90 percent of the Aurobindo pipeline is now without risk. We raised the fair value of the shares to Rs 690 from Rs 520 previously, valuing the shares at 13 times FY2022 EPS, ”he said.
Shares of Aurobindo Pharma traded at Rs 655 on Thursday, registering a nearly 125 percent increase in the past month.
Motilal Oswal has a target price of Rs 745 in stock. “We remain positive at Aurobindo and expect 7% growth in TCAC earnings during fiscal year 19–22, led by ANDA’s strong portfolio for US generics, improving profitability in the EU due to its foray into markets. newer and a change in product manufacturing to India, “it said.
The news about Unit IV came days after the company canceled the Sandoz deal due to delays in approval by the US Federal Trade Commission. USA
Analysts said that while the deal would have been a profit boost, it would also have added $ 800 million debt to the company’s book, which was undesirable in the ongoing weak environment.
The leading pharmacist is paying off $ 297 million in debt in the first nine months of this financial year compared to a $ 200 million annual target, which is also doing well with analysts.
Credit Suisse has doubled its share price target to Rs 665 from Rs 345, surprised by the authorization for Unit-IV. In his base case, he expected a new inspection, since the first three observations belonged to aseptic process controls.
“Approvals should come now (almost 15 in fiscal year 21). We increased EPS FY21E / FY22E by 13/14 percent, “he said.
Credit Suisse’s price target suggested a limited hike, as there are other plants that have been affected by USFDA orders as well.
The US Drug Regulator USA It has issued OAI (indicated official action) to Unit VII (oral formulations), Unit I (API) and Unit IX (API intermediates).
Centrum Broking said that the early closure of Units XI, I and IX and the payment of debt in the coming quarters could be key factors to consider.
“In addition to showing growth in the formulations business, the company will be able to maintain margins with a greater focus on the United States and the EU in the next two years. The EU business is expected to be profitable in fiscal year 21. We have undone the Sandoz acquisition of our earnings estimates, resulting in a nearly 13% cut in our earnings estimates. With this, we increase our earnings estimates by 3 percent and give a “buy” rating to the stock with a target price of Rs 830, “Centrum Broking said.
Unit VII of Aurobindo has 18 ANDA pending (new drug requests abbreviated). Unit XI is Aurobindo’s largest API facility. It has been under a warning letter since June 2019. In the last earnings call, Aurobindo mentioned that he had submitted a Corrective and Preventive Actions (CAPA) report for Unit VII in January 2020. For Unit XI, he is currently waiting a new inspection.
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