BofA Merrill Lynch cuts Aurobindo price target; retains buy

MUMBAI : Bank of America Merrill Lynch has retained its buy rating on Aurobindo Pharma, while lowering its price target to Rs125 from Rs205 earlier. The investment bank said the recent decline in the stock was overdone and a rebound in the company’s growth and margins could be a key trigger.

"Aurobindo’s stock price has corrected 25% in last 3 months due to slippages in growth affected by mfg. issues as well as worsened product mix. Overhang of USFDA issues further impacted the share price," said Arvind Bothra and S. Arun, analysts of Bank of America Merrill Lynch, in a note to clients.

"However, current multiples at 55% discount to sector appear cheap despite weak results ahead (2HFY12) as long-term drivers remain in place leading to recovery over the medium term," they said.