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									                         Gupta Equities Pvt. Ltd.
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November 08, 2010                                                                                                                                   GEPL Investment Research l Results Update l Pharmaceuticals l
Aurobindo Pharma Limited (Aurobindo)
“Back on track to achieve targets”

CMP : `1,304                                                                                                                              Target : `1,498                                                            STAY INVESTED
                                                                                                                                         Q2FY-11 Results Update
         COMPANY SNAPSHOT (November 05, 2010)
         Market Price                                           Sensex                                                                   Quarterly Performance: Consolidated:
         `1,304                                                 21,005
         52 Wk H / L                                            Bloomberg Code                                                           P The Net sales for the quarter stand at `11,126 mn, an increase of 26% compared to
         `1319 / 761                                            ARBP IN                                                                  `8,826 mn in Q2FY10.
         Mkt Cap ( mn )                                         Shares O/S ( mn )
          `75,939                                               58                                                                       P The PBT before the forex adjustments stands at `2,048 mn growth of 24.4% over
         BSE CODE                                               NSE CODE                                                                 `1,646 mn in the comparative quarter. Post the forex the PBT stands at `2,810 mn
         524804                                                 AUROPHARMA                                                               compared to `1,610 mn, growth of 75%.
         Equity (`Mn)                                           Face Value
         291                                                    5
                                                                                                                                         P reported at `1,983 mn compared to `1,032 mn in the same quarter last
                                                                                                                                           The PAT is
Share Holding Pattern                                                                                                                    year, an increase of 92%. It includes the forex gain of `762 mn compared to the loss of
Shareholding Pattern                                                                                                                     `36 mn in the same quarter last year. Before the forex adjustments the PAT stands at
                                                                                                                                         `1,221 mn compared to `1,068 mn in Q2FY10, growth of 14%.

                                                                                                                                         PThe operating margins for the quarter stand at 23%. The drop in the Ebidta
                                            10%                                                                                          margins is due to the overhead expenses of the SEZ and the US facility.
                                                                                                                                         PEPS stands at `34. Considering the core PAT the EPS is `21.
                                                                                                                                         The basic

                                                                                                                                         H1FY11 Performance: Consolidated:
          35%                                                                                                        55%
                                                                                                                                         For H1FY11, the Net sales increased by 17.3% to `20,349 mn from `17,354 mn in the
                                                                                                                                         similar period of last year. Its net profit, however, declined by 7.4 % to `2,496 mn from
                                                                                                                                         `2,697 mn. The US sales increased by 11.1% to `5,120 mn and that in Europe
                                                                                                                                         increased by 57.4% to `1,610 mn.
Price Performance Chart
                                                                                                                                         Quarter Analysis:

                                                                                                                                         The growth in the quarter is attributed to the robust formulation sales; US market
                                                                                                                                         contribution and forex gains. Also increasing traction across other different markets
                                                                                                                                         catered and addition of capacity contributed to the growth in Q2FY11.
                                                                                                                                         Business Performance:

 0.0                                                                                                                                     The formulations sales grew by 38.3% to `6,157 mn for the quarter contributing 54%











                                                                                                                                         to the total revenues. The major contribution was by the US markets (48% to the
                                                                                                                                         revenues). It commercialized 67 products in the US market during the quarter.
                                                      Aurobindo                   Sensex
                                                                                                                                         The API segment (Active pharmaceutical ingredients) contributed `4,517 mn to the
Company Profile                                                                                                                          total revenues, growth of 7% over the same quarter last year.
                                                                                                                                         The dossier income for the quarter stands at `699 mn, 74% growth over the
Aurobindo is one of the largest Indian                                                                                                   comparative quarter.
Pharmaceutical company in terms of the
                                                                                                                                         Regulatory Filings:
manufacturing facilities and capacities as well as
the products offered. It manufactures generic                                                                                            5 ANDAs were filed in the US during the quarter taking the cumulative count to 185.
pharmaceuticals, APIs (Active Pharmaceutical                                                                                             In Q2FY11, 33 dossiers were filed in Europe taking the net to 852 filings.
Ingredients) and Intermediaries with presence in                                                                                                                              Regulatory Approvals:
key therapeutic segments like anti-retrovirals, CNS                                                                                       Filings                                                     Q2 FY-11         As on Sept-10
(Central Nervous system), cardio-vascular,
                                                                                                                                          ANDAs (USA)                                                       5               185
gastroenterology, SSPs (Semi Synthetic Penicillin),
cephalosporins, etc. It is one of the largest Active                                                                                      DMFs (USA)                                                        3               151
Pharmaceutical Ingredients (SSP & Cephalosporins                                                                                          Formulations Dossiers in other key regulated markets              48             1111
) manufacturers in India among the FDA approved
facility companies. It also qualifies as one of the
                                                                                                                                          API DMF/COS filings in other key regulated markets                80             1599
leading players in Anti-retroviral products.
                                                                                                                                          Patents                                                           13              442
                                                                                                                                         Source: Company Presentation

   GEPL Investment Research                                                                                        I            Poonam Ohri         I   +91 22 66182400   I        I                1
         Gupta Equities Pvt. Ltd.

November 08, 2010                                                 GEPL Investment Research l Results Update l Pharmaceuticals l

                           With regards to the business with Big Pharma companies, in the quarter under review, Aurobindo did get
                           substantial milestone payments from Astrazeneca and its deal with Pfizer is also gaining traction as well.
                           Other Highlights:
                           P The Company has entered into licensing and supply agreements with AstraZeneca to supply several solid
                           dosage and sterile products for Emerging Markets. These products fall under a broad range of important
                           therapeutic segments such as Anti-Infectives, Cardiovascular System (CVS) and Central Nervous System (CNS).
                           P of directors have approved 5:1 stock split.
                           The board
                           It also approved an interim dividend of 100% or `5 per share for the fiscal year 2011.
                           The company has commercialized the SEZ near Hyderabad considering 4 months of operations and should
                           breakeven by Q3-Q4 FY11. Also the New Jersey facility is gradually picking up, currently providing 3 products
                           and the 4th expected to be launched by Dec-Jan. Both of these should help in the ramp up of formulations sales
                           and address the capacity constraints.
                           P total o/s FCCBs is USD 139 mn
                           FCCBS: The
                           The Company has reported good growth in the quarter under review which was further enhanced by the forex
                           gains. Aurobindo is well on track with the plans to optimize on the opportunities in the generics market
                           maintaining a positive outlook for the company. We have revised our estimates to the extent of factoring the
                           forex adjustments as well the increase in the expenses which have impacted the Ebidta for H1FY11.

                                   Revised Estimates
                           (`mn)                  FY11E
                           Net sales            Unchanged

                           Old Estimate              10472
                           New Estimate               9991
                           % change                   -5%

                           Old Estimate               5245
                           New Estimate               5624
                           % change                    7%

                           Basic EPS (Rs)
                           Old Estimate                93
                           New Estimate                97
                           % change                    4%

                           Source: GEPL Research

                           Future Perspective: Triggers for growth:
                           With the additional capacities getting operational, the company is better positioned to cater to the increasing
                           demand which were hindered due to capacity constraints.
                           Also the successful association with the different MNCs , should further boost the confidence of the company
                           as a preferred supplier.
                           The company is gradually building up on its CRAMS customer pipeline to ramp up this segment of business
                           going forward.
                           The New multipurpose liquid injectable facility over 30.4 acres of land near Hyderabad, specializing in
                           manufacture of general injectable range including glass vials for lyophilized sterile powder and liquids,
                           ampoules, pre-filled syringes and blow filled seals as well as the High end antibiotic Penams powder injectable
                           facility near New Delhi, both are expected to be ready by end of 2010.

GEPL Investment Research                                                                                                                 2
          Gupta Equities Pvt. Ltd.

November 08, 2010                                                               GEPL Investment Research l Results Update l Pharmaceuticals l

                                 Valuations and comments:
                                 Aurobindo is back on track this quarter. The additional facilities in the formulations space are commissioned
                                 and should start catering to the demand in the coming quarters. Having achieved the initiating target of `1,200,
                                 backed by the positive outlook shaping for the company we recommend to STAY INVESTED for a revised target
                                 of `1,498. At the price of `1,304 , the stock is trading 12x its FY12E diluted EPS of ` 107.

                                 Financials (Consolidated):
                                  Rs mn                                       Sep-10 Sep-09 Var% Jun-10 Var%              FY10    FY09     Var%    FY11E     FY12E

                                  Net Sales                                     11,126    8,826     26%   9,223    21%    35754 30773 16%           42101    48245
                                  Total Expenses                                 8,584    6,756     27%   7,505   14.4%   27523 25609 7%            32,110   36,528
                                  EBITDA                                         2,542    2,070     23%   1,717    48%     8,232 5,164 59%           9991    11717
                                  Interest                                         193      182     6%      129    49%       678   839 -19%            986      837
                                  Foreign exchange (Gain)/loss                   (762)        36     -      418      -    -1073 2500     -            -344        0
                                  Depreciation                                     407      370     10%     401    2%      1493 1276 17%             1,686    1,830
                                  Other Income                                     106      127    -17%      31   240%       389   177 121%            258      294
                                  Recurring pre-tax income                       2,810    1,610     75%   1,636    72%     7,522   726 936%          7,921    9,344
                                  Taxation                                         830      578     44%     285   191%     1914    214 796%          2297     2429
                                  Net Income before Extraordinary item           1,980    1,032     92%   1,351    47%     5609    513 994%          5,624    6,915
                                  Exceptional items                                   0        0     -        0      -        22   490   -               0        0
                                  Reported Net income                            1,980    1,032     92%   1,351    47%     5631 1,003 462%           5,624    6,915
                                  Minority Interest                                -2.8     -0.2     -      0.7      -         3   0.5   -               0        0
                                  Net Profit                                     1983     1032      92%   1352     47%     5634 1003 462%            5624     6,915
                                  Adjusted PAT                                   1221     1068      14%     933            4511 2522                 5280     6915

                                  Basic EPS after extraordinary items               34       19     -         9     -       104       19     -          97      119
                                  Ratios (%)
                                  EBITDA margins                                  23%     23%              19%             23%     17%                24%      24%
                                  Personnel cost/sales                            10%      9%              10%              9%      8%                10%      10%
                                  Raw material/sales                              47%     44%              48%             50%     50%                49%      49%
                                  Tax rate                                        30%     36%              17%             25%     29%                29%      26%
                                 Source: Company, GEPL Research

                                                                                                                            Poonam Ohri
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GEPL Investment Research                                                                                                                                       3

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