Buy Aurobindo Pharma; target of Rs 1350: ICICI Securities

ICICI Securities's research report on Aurobindo Pharma

Aurobindo’s Q2FY26 performance was steady, helped by its Europe (+17.8%) and ARV (68.4%) verticals. US sales, at USD 417mn, beat our expectation; though, gRevlimid sales slipped sequentially. EBITDA margin, at ~20%, was sustained despite operating cost of new projects and lower gRevlimid revenue. Most of the new ventures are on track. In Q3FY26, Aurobindo would start shipments of biosimilars to Europe and more biosimilar approvals are anticipated in FY27. CDMO collaboration with MSD is extended to one more product and the plant is slated to start commercial operations in FY28E. Aurobindo is in talks with the Indian government for the imposition of MIP on pen-g imports and expects the project to be gross margin accretive (over 60%). Management reiterated its FY26 guidance of 20–21% margin, with an expectation of gradual improvement to 21–22%. We raise FY27E EPS by ~2% to factor in higher biosimilars sales. Maintain BUY with a higher TP of INR 1,350, based on 16x FY27E EPS.

Outlook

We raise our FY27E EPS by ~2% to factor in better sales from biosimilars. The stock currently trades at 13.6x FY27E and 10.7x FY28E earnings, and EV/EBITDA multiples of 7.1x FY27E and 5.6x FY28E. We maintain BUY with a higher target price of INR 1,350 (INR 1,300 earlier), based on 16x FY27E EPS (unchanged).