Analysts welcome Aurobindo calling off stake buy in Cronus
Aurobindo shares have fallen 36% from their 52-week high of Rs 1,063.75 hit on May 11. The company’s lower-than-expected June quarter results, seven observations by the US drug regulator after the inspection of its Unit 1 plant and the Cronus acqu...
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Aurobindo shares surged as much as 6.5% earlier on Monday but the optimism was short-lived. The stock gave up all the gains to close at Rs 683.10, almost unchanged over the previous day.
Mumbai: Analysts cheered the cancellation of a 51% stake purchase in Cronus Pharma by Indian drug major Aurobindo Pharma. However, they said that the company is going through a large investment phase which may impact the earnings outlook.
Aurobindo shares surged as much as 6.5% earlier on Monday but the optimism was short-lived. The stock gave up all the gains to close at Rs 683.10, almost unchanged over the previous day.
“While this action may allay concern over capital allocation, its earnings outlook remains benign in the medium term as the company is going through a large investment phase. The key near-term trigger is value unlocking from the ongoing demerger of its injectable portfolio into a separate entity,” said CLSA, maintaining an outperform rating with a target price of Rs 830.
Aurobindo shares have fallen 36% from their 52-week high of Rs 1,063.75 hit on May 11. The company’s lower-than-expected June quarter results, seven observations by the US drug regulator after the inspection of its Unit 1 plant and the Cronus acquisition for $56 million have accentuated the stock’s slide in recent weeks. Axis Securities has upgraded the stock to buy with an unchanged target price of Rs 850 on termination of the Cronus deal and potential unlocking in the injectables business. The brokerage has upgraded the stock also on account of strong research and development pipeline as well as attractive valuation.
“While near-term growth in the US could remain muted due to increasing price erosion, inventory liquidation and USFDA issues, visibility to improve over the medium term and long term led by a strong pipeline of 174 ANDAs (abbreviated new drug applications) which includes complex generics, vaccines, biosimilars, etc.,” said Axis Securities.
