Aurobindo Pharma – I

I chose to value Aurobindo Pharma based on a screen of high growth, low PE ratio companies for which the EPS growth rate has been greater than stock price growth rate.

Numbers and Narratives

Aurobindo Pharma is a mature pharmaceutical company that is witnessing a second lease of growth. I expect it to continue growing better than the industry average for the next 5 years while keeping its industry average margins.

The core numbers that I arrive at based on the story are

  • Compounded revenue growth for next 5 years = 12% (14% last 5 years)
  • EBIT margin in year 5 = 20% (industry average)
  • Initial cost of capital = 9.99%


I’ve used the above numbers along with the financial information to compute my DCF valuation for Aurobindo Pharma as seen below.

As you can see, the valuation price came out to ₹1396.12, about 43% higher than the current trading price of ₹975.55.



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