- Target
- ₹1,600
- At report
- ₹1,589+1% printed
- Vs our close
- −5.8%
Axis Securities downgrades Aurobindo Pharma from BUY to HOLD after a Q1FY27 operational beat on revenue, EBITDA and PAT, citing above-average valuation despite a strong growth outlook across US, Europe, Pen-G, China OSD and the biosimilars/CDMO pipeline. The target price is raised to Rs 1,600 (18x FY28E EPS) from Rs 1,345, implying only 1% upside from CMP.
- Q1FY27 revenue grew 16.3% YoY and 3.4% QoQ to Rs 9,150 Cr, beating Axis estimate of Rs 8,390 Cr by 9.1%, led by broad-based growth in US ($399 Mn, +8.1% YoY), Europe (Rs 2,937 Cr / €267 Mn, +25.6% YoY) and Growth Markets (Rs 1,063 Cr, +37.7% YoY)
- Gross margin expanded 153 bps YoY to 60.4%; operating EBITDA (ex one-time lease derecognition loss of Rs 43 Cr) grew 20% YoY to Rs 1,924 Cr at 21% margin, beating estimate by 8.8%
- PAT grew 25.2% YoY to Rs 1,032 Cr, 17.7% ahead of the Rs 877 Cr Axis estimate
- Management reaffirmed FY27 guidance of double-digit revenue growth, EBITDA margin above 21%, and absolute EBITDA exceeding Rs 8,000 Cr
- Lannett acquisition ($247 Mn) closed post FTC approval, strengthening complex generics/controlled substances/US government channel presence, with gAdvair launch slated for Aug'26
- Pipeline optionality from biosimilars (CuraTeQ), TheraNym biologics CMO (anchor client MSD, targeting $150-200 Mn long-term revenue by 2032) and the newly acquired A1 Biochem CRO (targeting 3-5x revenue scaling)
- USFDA inspection outcomes issuing Warning Letters/OAI or 483 observations could impact revenue growth
- Entry of new players may increase pricing pressure in the injectable portfolio
- Delay in the launch of biosimilars in the market
- Net Sales Rs 9,150 Cr, up 16.3% YoY and 3.4% QoQ, beating Axis estimate by 9.1%
- EBITDA Rs 1,881 Cr, up 17.3% YoY, margin 20.6% (up 18 bps YoY), beating estimate by 8.8%
- Reported PAT Rs 1,032 Cr, up 25.2% YoY and 12.1% QoQ, beating estimate by 17.7%
- EPS of Rs 17.8 vs Axis estimate of Rs 15.0
- US revenue $399 Mn (Rs 3,770 Cr), up 8.1% YoY; Europe formulations Rs 2,937 Cr (€267 Mn), up 25.6% YoY / 11% YoY constant currency; Growth Markets Rs 1,063 Cr, up 37.7% YoY
- R&D spend held at Rs 344 Cr (~4% of revenue); effective tax rate 31.9% in Q1FY27, expected to normalise to 28-29% by FY27 end
- gAdvair launch in the US scheduled for Aug'26
- PLI scheme incentive disbursements for Pen-G expected between September and March
- China OSD facility targeted to turn EBITDA positive in FY27
- TheraNym Unit 1 equipment qualification beginning Nov'26
| Broker estimates | Unit | FY25 | FY26 | FY27E | FY28E |
|---|---|---|---|---|---|
| Net Sales | ₹ cr | 31,724 | 33,653 | 37,528 | 41,739 |
| EBITDA | ₹ cr | 6,583 | 6,846 | 8,106 | 9,183 |
| EBITDA Margin | % | 20.8 | 20.3 | 21.6 | 22 |
| Reported PAT | ₹ cr | 3,484 | 3,503 | 4,419 | 5,155 |
| EPS | ₹ | 60 | 60.3 | 76.1 | 88.8 |
| PER | x | — | 21.6 | 21 | 18 |
| EV/EBITDA | x | — | 10.8 | 10.8 | 9.1 |
| P/BV | x | — | 2 | 2.2 | 2 |
| ROE | % | 10.7 | 9.2 | 10.5 | 11 |
| RoCE | % | 15.5 | 14 | 17.1 | 19.5 |
Valuation: 18x P/E on FY28E EPS. Target price of Rs 1,600/share is derived by valuing Aurobindo at 18x FY28E EPS, up from the earlier valuation of 17x Dec FY27E EPS (Rs 1,345 TP), implying 1% upside from CMP of Rs 1,589. Post Q1FY27 results, Axis cut FY27E/FY28E Revenue by 2.8%/3.1%, EBITDA by 0.9%/3.1%, and PAT by 4.2%/6.4%, while raising the target price to Rs 1,600 from Rs 1,345 and downgrading the rating from BUY to HOLD.
Extraction note: The EPS shown in the Q1FY27 'Key Financials' table (Rs 17.8) differs from the FY26 full-year EPS in the estimates table (Rs 60.3); both are as printed. Recommendation history table on page 7 shows a downgrade from BUY to HOLD on 07-Aug-26 with TP raised from 1,345 to 1,600.