Aurobindo Pharma Reports Flat Net Profits

Mid-sized pharma company Aurobindo Pharma, has reported subdued net profits for the quarter ended March 31, 2013. The net profits for the quarter came in at 108.61, a growth of less than 1% on a year-on-year basis. On a consolidated basis, the company reported net sales of Rs 1552 crore, a growth of 32.62% on a yearly basis.

As the company has not shared the press release, its performance in key geographies is not available as of yet.

The EBITDA margins for the quarter were at 15.46%, a growth of nearly 350 basis points on a year-on-year basis. On a sequential basis, however, there is a drop of 123 basis points. The major reason behind the improvement in margins is the decline in material cost, which as a percentage of sales was at 46.68% in Q4FY13 against 56.76% a year ago. Employee costs and Other Expenses have also shown some moderation in growth with respect to sales growth, which helped the company to clock margins expansion.

In the fourth quarter of FY12, the company reported forex gains of Rs 103.45 crore, whereas in the quarter under review (Q4FY13), the losses stood at Rs 1.3 crore, due to which its profitability has remained weak. Its interest expenses for the quarter were Rs 31.6 crore, down 10% YoY. The tax rate during the quarter was at 29% against 32% a year ago.

On the valuations front, at its CMP of Rs 170 the stock is available at a TTM price-to-earnings multiple of 17x. We believe that the stock should return nearly 30%-35% in next one year, and hence, advise investors to enter the counter.