AUROBINDO - A Washout Result

November 2011 | 6 pages | ID: A1E89724223EN
MP Advisors

Abstracts

Aurobindo’s Q2 FY12 result was much below our expectations with almost complete washout on every parameter. While formulation sales, income from dossier, gross and operating margin declined; overheads, interest cost, working capital, capex and total debt continues to grow. On top of this, there is no clarity about the USFDA resolution for its plant – an issue that is more strategic for a company ambitious of growing through contract manufacturing.

We reduce our EBITDA estimate for FY12 by 15% even after allowing some improvement in margin. We continue to remain concerned about slowdown in Pfizer contract, reduction in ARV margin, relentless capex and increasing debt (up by . We reiterate our Underperform with a revised target price of `100 from `120 earlier – reflecting the reduction in our estimates. Our target price is derived out of DCF as we believe this to be the only valuation parameter for a company that is generating negative free cashflows in last 8 out of 9 years.

Contents

COMPANIES MENTIONED

AUROBINDO