Lifting of import alert on its Hyderabad unit not only allows for improvement in revenues but will also aid in margin expansion

The Aurobindo Pharma stock consolidated on its gains of 11 per cent on Thursday, with further gain of five per cent intra-day on Monday. The stock registered sharp gains after news that the US FDA has lifted the import alert on one of its units in Hyderabad.

The restriction was imposed on the company in February 2011, forcing it to stop exports of nine products to the US market. The company said the unit which manufactures non-sterile products had annual sales of $33 million prior to the import alert. The lifting of the import alert not only allows for improvement in revenues, but will also aid in margin expansion. “We believe the company should be able to achieve historical sales from this plant by FY15.

The approval should be more beneficial on the margin front, as the company was only booking overhead cost from the plant without any addition to the topline,” says Hitesh Mahida of Fortune Equity Brokers. At the current price, the stock is trading at six times its FY14 earnings estimates, with Bloomberg consensus target price estimates at Rs 232.

Strong US sales
Driven by new launches and higher base of existing product sales, the US business has been going strong with the company reporting a 58 per cent year-on-year growth for formulation exports in the December quarter to Rs 513 crore.

For more visit: Business Standard

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