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Aurobindo Pharma: Q2 numbers in line while ARVs significantly below estimates

News: Revenues de-grew 2.1% YoY to Rs.5941.9 crore (I-direct estimate: Rs.6117.4 crore) amid a 6.9% YoY growth in US business to Rs.2967.6 crore (I-direct estimate Rs.2888 crore) and 9.7% YoY growth in Europe formulations to Rs. 1662 crore (I-direct estimate: Rs.1597.9 crore). RoW markets de-grew 13.5% YoY to Rs.386.3 crore (I-direct estimate Rs.401.9 crore). On the other hand, ARV segment de-grew 71.2% YoY to Rs.145 crore (I-direct estimate Rs.351.9 crore) while API segment de-grew 5.8% YoY to Rs.780.6 crore (I-direct estimate Rs.829 crore). [Note: Revenue from Natrol excluded for ease of comparison]. EBITDA margins were down 213 bps YoY at 20% (I-direct estimate: 19.7%) due to cost pressure on some of the key raw materials as well as higher logistic costs. EBITDA de-grew 17.2% YoY to Rs.1186.7 crore against I-direct estimates of Rs.1206.3 crore. Adjusted Net Profit de-grew 13.5% YoY to Rs.697 crore (I-direct estimate: Rs.708.6 crore) in-line with operational performance, higher other income and lower tax rate.

Views: Aurobindo Pharmaceuticals’ Q2FY22 results were mostly in line with I-direct estimates except for ARVs, which were significantly below the estimates due to higher stocking on advanced procurement last year by multilateral agencies. Quarterly fluctuations notwithstanding, Aurobindo possesses one of the best enduring generics ecosystem among peers (vertically integrated model, lower product concentration) to withstand the volatility in the US generics space. The company has also significantly improved its net debt position from foregoing the Sandoz deal and from the sale of its Natrol business. On the regulatory front, while a few other plants still remain under the USFDA scrutiny, the erstwhile clearance of a critical plant (Unit IV) indicates that the company continues to work towards stricter adherence.