Our price objective is based on 11x FY15e EPS of R40.2. With strong growth visibility, improving return ratios and balance sheet, we believe Aurobindo deserves to trade at a higher multiple. Historically, the company has traded at a P/E of 9.6x one-year forward earnings. Our target is still at a 25% discount to midcap peers to factor in lack of branded business, execution-related challenges and the companys relatively higher debt on balance sheet. Given the shift in mix towards higher formulation sales, the stock is less susceptible to changes in commodities prices.
Aurobindo Phrama has secured over 11% market share in duloxetine or gCymbalta ($4.5 billion market size) two weeks after its launch, according to IMS. ARBP launched this product through its partner (Citron Pharma) with 180-day shared exclusivity along with four other generic drug makers.