Aurobindo Pharma 6% top-line beat translated into 27% & 46% beats in EBIDTA & adj. PAT respectively. While favorable mix (strong US) and INR weakness helped, we believe this also reflects the extent of operating leverage in the business.
Citi Analysts Maintains FY14 guidance for now, upside possible;
a) Margins in 2H to be stronger than in 1H;
b) Expects to repay US$50-70m of debt by year-end, with improving profitability and WC cycle aiding cash flow;
c) Cephs from Unit VI: marginal sales in 1Q, targeting US$30m annualized sales over time;
d) Injectables: plans to consolidate all assets (Unit IV, Auromedics + acquired 60% stake in Celon) in a wholly owned subsidiary – expects to have c100 ANDA filings over next 3-4 years, currently two products in the shortage list, could have c15 such filings by FY14 end.
Aurobindo Pharma is expected to report an EPS of Rs 20.39 for FY 2014. Citi has set a target price of Rs 260.
