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Aurobindo Pharma: Price Erosion and Rupee Appreciation Impacts Revenues - Views on News from Equitymaster
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  • Sep 8, 2017 - Aurobindo Pharma: Price Erosion and Rupee Appreciation Impacts Revenues

Aurobindo Pharma: Price Erosion and Rupee Appreciation Impacts Revenues
Sep 8, 2017

Aurobindo Pharma has announced its results for first quarter of financial year 2017-18 (1QFY18). Net sales have declined by 2.3% YoY and net profits have declined by 11.4% YoY. Here is our analysis of the results.

Performance summary
  • Topline witnessed a decline of 2.3% mainly due to price erosion in the US markets and rupee appreciation. US business declined by 0.5% percent this quarter as compared to last year and increased by 3.1% on a sequential basis (Q4-FY17). European markets grew by 10.4% as compared to Q4FY17 and grew by 18.1% on a sequential basis. ARV business declined by 19.3% Y-o-Y for the quarter. API business declined 14.9% Y-o-Y for the quarter mainly on account of GST implementation.
  • Operating margins declined to 22.4% in Q1FY2018 as compared to 23.6% in Q1FY2017. Margins declined mainly due to lower sales but Aurobindo pharma was able to improve its gross margins mainly on account of its product mix.
  • Net profits declined by 11.4% Y-o-Y for the quarter. This was mainly due to increase in depreciation expense by around 23.5%.

    Financial performance: A snapshot
    (Rs m) 1QFY17 1QFY18 Change
    Net sales 37,046 36,211 -2.3%
    Other operating income 620 577 -7.0%
    Total Sales 37,666 36,788 -2.3%
    Expenditure 28,776 28,560 -0.8%
    Operating profit (EBDITA) 8,890 8,228 -7.4%
    EBDITA margin (%) 23.6% 22.4%  
    Other income 229.3 332.6 45.1%
    Interest (net) 206.4 168.7 -18.3%
    Depreciation 1,062.4 1,311.8 23.5%
    Profit before tax 7,850 7,080 -9.8%
    Exceptional Items 7 13  
    Tax 2,008 1,910 -4.9%
    Minority Interest -1 -2  
    Profit after tax/(loss) 5,850 5,185 -11.4%
    Net profit margin (%) 15.8% 14.3%  
    No. of shares (m) 585 586  
    Diluted earnings per share (Rs)   38.24  
    Price to earnings ratio (x)*   19.35  

    *based on trailing 12 months earnings


    Business Mix
    (Rs m) 1QFY17 1QFY18 Change
    Formulations 30,321 30,510 0.6%
    (% of revenues) 80.50% 82.93%  
    API 7,345 6,250 -14.9%
    (% of revenues) 19.50% 16.99%  
    Others 0 28 NA
    (% of revenues) 0.00% 0.08%  
    Total 37,666 36,788 -2.3%
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