On expectations of strong 23 per cent earnings per share (EPS) CAGR over FY16-18, Bank of America Merrill Lynch (BoAML) has maintained its buy rating on Aurobindo Pharma. This expectation was build strong after USFDA's successful inspection of unit IV plant at Andhra Pradesh and establishment inspection report for Penem facilities. The management of the pharma has indicated that the US FDA has successfully completed inspection of its unit IV plant at Andhra Pradesh, India.
The FDA has issued 2-3 minor observations which should not impact the approval of pending products from the site as per the company. According to a market expert this is a positive development as Unit IV was the last major manufacturing site with an inspection pending in the near term and Unit IV houses the manufacturing plants responsible for production of Injectables as well as Opthalmics - which will be the key reasons of growth for ARBP over the near-midterm.
In addition to Unit IV, the Penem facilities of the pharma giant have also received establishment inspection report for recent inspections as per the management. With this facility, most major manufacturing sites of the company have been inspected and cleared over the last 1 year, and as a result no major manufacturing location has an inspection pending over the near term.
BoAML believes this increases the visibility of the Company over the earnings as well as growth of the company as compared its other peers who are still dealing with some or the other pending regulatory issue this is impacting their operations and/or approvals.
Market experts are of opinion oral solids is likely to sustain growth momentum in the market of US over next few years even on this higher base, injectables portfolio of the company is likely to register stronger more than 30 per cent CAGR over a period of 2-3 years with ramp up in new launches including 9 in rest of FY17.
As per the latest update by the Company, unit IV also contained a brownfield extension for lypholized vials. This clearance would now allow Aurobindo to successfully launch generic Vancomycin in the US market, for which the company has already received approval, BoAML added.
Aurobindo has reported profit CAGR of 89 per cent and revenue 33 per cent during FY13-16. Active pharmaceutical ingredients business contributed 43 per cent to revenue and formulations segment 57 per cent in same period.
Aurobindo Pharma share price is staying strong at Rs 810.05 on NSE, close to its 52 week high of Rs 891.50 made on 30th December 2015. Aurobindo Pharma is one of the Top 500 shares recognized by Dynamic Levels.
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