Earnings Outlook
Higher costs likely to drag Aurobindo's consol PAT down
This story was originally published at 11:47 IST on 4 February 2025
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By Narayana Krishna
HYDERABAD - Aurobindo Pharma Ltd.'s December quarter net profit is expected to decline both on year and on quarter, mainly due to higher operating costs from the commissioning of its Kakinada plants, along with increased employee costs and other expenses. However, revenue is projected to grow in modest single digit, analysts said.
The Hyderabad-based pharmaceutical company's consolidated net profit is anticipated to decline by 17% on year and 15% on quarter to INR 9.3 billion, based on estimates from 10 brokerages. Revenue for the quarter is expected to rise 7% on year and 1% sequentially to INR 78.9 billion. Analysts are divided on the various factors that could impact Aurobindo Pharma's December quarter performance.
Projecting the lowest net profit estimate of INR 8.1 billion, KRChoksey Research said Aurobindo Pharma will face margin pressure in the December quarter due to rising employee costs and other expenses. On the other hand, Kotak Institutional Equities, with the highest estimate of INR 10.1 billion, is optimistic about all aspects of the company's business.
Revenue estimates for Aurobindo Pharma range from INR 76.1 billion, the lowest by Motilal Oswal Financial Services, to the highest estimate of INR 81.8 billion by PhillipCapital India. The company is set to announce its Oct-Dec earnings Thursday.
Brokerages such as Kotak Institutional Equities, PhillipCapital, YES Securities, and HDFC Securities expect Aurobindo Pharma's US sales for the December quarter will likely show improvement. However, Nuvama Wealth Management and Motilal Oswal anticipate a decline, citing reduced sales of generic Revlimid and ongoing issues in the injectables business.
Kotak Equities expects Aurobindo Pharma to report sales of $417 million in the US, excluding contribution from Revlimid. Analysts, including those from Kotak Equities, expect Revlimid sales for the period to be $28 million-$30 million, up from $27 million in the previous quarter.
Europe, the company's second-largest revenue contributor, is expected to see on-year revenue growth of 12-20% for the quarter, according to Motilal Oswal and Kotak Equities.
KRChoksey has projected 169 basis points on-year contraction in Aurobindo Pharma's earnings before interest, tax, depreciation, and amortisation margin to 20.1%, while Kotak Equities has forecast 60 bps on-year rise in the margin to 22.4%. The average EBITDA estimates of nine brokerages is pegged at INR 16.6 billion.
Brokerage ShareKhan has assigned a 'buy' rating to the stock with a price target of INR 1532, while HDFC Securities has an 'add' rating with a target price of INR 1,440. At 1140 IST, shares of Aurobindo Pharma traded at INR 1,168.40 on the National Stock Exchange, up 3.8% from the previous close.
Following are the Oct-Dec earnings estimates for Aurobindo Pharma Ltd. based on reports from 10 brokerage firms in descending order by the estimate of net profit:
Brokerage name | Net sales | Net profit | EBITDA |
-------(In INR million)------- | |||
Kotak Institutional Equities | 81,119.00 | 10,095.00 | 18,204.00 |
Sharekhan Ltd | 80,900.00 | 9,800.00 | ---- |
Nuvama Wealth Management Ltd | 78,498.00 | 9,780.00 | 16,141.00 |
PhillipCapital (India) Pvt Ltd | 81,833.00 | 9,621.00 | 17,188.00 |
Axis Securities Ltd | 78,820.00 | 9,480.00 | 16,540.00 |
YES Securities (India) Ltd | 79,254.00 | 9,254.00 | 17,072.00 |
Prabhudas Lilladher Pvt Ltd | 77,016.00 | 9,103.00 | 16,525.00 |
Motilal Oswal Financial Services Ltd | 76,116.00 | 9,030.00 | 16,289.00 |
HDFC Securities Ltd | 78,116.00 | 8,671.00 | 16,248.00 |
KR Choksey Research | 77,629.00 | 8,120.00 | 15,595.00 |
Average | 78,930.10 | 9,295.40 | 16,644.67 |
End
US$1 = INR 87.11
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Subhojit Sarkar
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