Britannia Industries Ltd.
Reco Price Rs2,922, Achieved Target Rs3,439, New Target Rs3,635
We had recommended a BUY on Britannia Industries Ltd (BRIT) in our Initiating coverage at a recommended price of Rs2,922 released on September 01, 2015 for a target price of Rs3,956. We had revised our Target Price to Rs3,439 in our Q4FY16 result update released on May 24, 2016. The stock has touched a high of Rs3,484 in yesterday's trading session yielding a total return of 17.6% from our recommendation price of Rs2,922. We expect revenue/EBITDA/PAT CAGR of 17.4%/20.2%/20.9%, respectively, over FY16-FY18E. BRIT's growth outlook continues to remain healthy, given its strong innovation pipeline, story of premiumisation intact, efforts to increase share in rural & northern markets, increase in distribution channel and costs efficiency. The stock is currently trading at 35x FY18E which leaves limited headroom for further upside. We maintain an ACCUMULATE rating with a revised target price of Rs3,635 (based on 37x FY18E EPS and 23.3x EV/EBITDA).
Aurobindo Pharma (Q1 FY17): Strong start to FY17 - BUY
CMP (Rs) 788, 12-mts Target (Rs) 1,030, Upside 31.1%
Aurobindo reported lower than expected revenue and EBIDTA growth at 13% and 23% yoy respectively. US sales jumped an inline 21% yoy on back of 7 new products plus lagged effect of Q4 launches like Abilify. Management admitted to some lag in product launches as approvals came in faster than expected and would look to launch some large products including a still meaningful Nexium by October. Ex-US top line was a mixed bag with Europe and EM growth offset by lower than expected anti retro viral sales. Gross and EBIDTA margin expanded by a similar ~190bps yoy which drove 24% increase in PAT. Company guided for 4-4.5% R&D and capex of Rs12-13bn in FY17. ARBP would focus on oncology, hormones, vaccines and peptides filings though revenues are still 2-3 years away. We lower FY18E EPS estimates by 5% but reiterate Aurobindo as top pick with unchanged 1-year target of Rs1,030, based on 20x FY18E EPS, which is still at a discount to peers like Lupin and Cipla.
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