Aurobindo Pharma

Investment case

Value: largest US ANDA portfolio

Why this business

Aurobindo is India's 3rd-largest listed pharma company by revenue (FY26 sales Rs 33,653 cr), a vertically integrated generics maker with 896 US ANDAs (737 final approvals) as of Jun-2026. Q1FY27 revenue mix: US Rs 3,770 cr (41%), Europe Rs 2,937 cr (32%), Growth Markets Rs 1,063 cr, ARV Rs 330 cr, API Rs 1,049 cr. It owns Eugia (injectables), CuraTeQ (biosimilars, 4 EU launches), a Pen-G/6-APA PLI plant at Kakinada, a China oral-solids plant supplying the EU, and completed the Lannett (US) acquisition on 29-Jun-2026.

What we believe

1. 01Earnings inflecting: Q1FY27 PAT +25% YoY and EBITDA margin 21% vs 20.4%; management guides FY27 absolute EBITDA >Rs 8,000 cr (+16% on FY26 Rs 6,870 cr).
2. 02Europe is now a second engine: Rs 2,937 cr in Q1 (+25.6% YoY) at >20% EBITDA margin per Axis; Growth Markets +37.7%.
3. 03Optionality from complex/biosimilars: 4 biosimilars already selling in EU/UK, denosumab EMA filing underway, omalizumab filing targeted Q3-2026; TheraNym/CuraTeQ guided to USD 150-200 mn revenue by 2032 at 35-50% EBITDA margin.
4. 04Backward integration: Pen-G/6-APA plant running 60-70% utilisation in Q4FY26 with a 10,000 MT FY27 target (HSIE, Feb-2026); China plant to exceed 2 bn tablets capacity by end-2026/mid-2027 supporting EU margins.
5. 05Balance sheet: net cash ~USD 42 mn at Jun-2026 after Lannett and buyback; stock at ~19x FY28E EPS of Rs 88.8 vs 21% FY26-28 EPS CAGR.

Why now

TTM PE 25.2x per screener; 5-yr average PE not sourced. Axis notes it raised target multiple from 17x to 18x, i.e. stock is at the upper end of its own recent range after +58% in 12 months. EV/EBITDA computed as mcap/FY26 EBITDA given net-cash position. EV/EBITDA 13.9x; dividend yield 0.2%.

Market disagreement

• Sun Pharma: Sun trades at a large specialty premium while its US generics fell 9.7% in Q1FY27; Aurobindo offers 21% EPS CAGR at ~19x FY28E with no Revlimid cliff exposure.
• Cipla: Cipla faces a FY27 gRevlimid earnings decline (brokers flag ~30% PAT drop in Q1FY27 preview); Aurobindo's US base is diversified across 737 approved ANDAs plus injectables and had no Revlimid dependence.
• Lupin: Lupin's FY26-27 earnings lean on a few US exclusivities (Tolvaptan-type events); Aurobindo's growth is broader (Europe +26%, Growth Markets +38%) and is backed by Pen-G and biosimilar integration.

Position sizing

Value Mid cap  1.6% of the PMS on $31 Jul 2026 (August rank 29). Satellite positions are owned for an asymmetry, sized up when the cycle rewards risk and reduced when it does not.

Catalysts

• Advair generic launch via Lannett guided for Aug-2026; Lannett utilisation ramp over 12 months.
• Omalizumab EMA filing targeted Q3-CY2026; denosumab EMA filing underway; TheraNym Unit 1 qualification Nov-2026.
• Q2FY27 results (Nov-2026): delivery against >Rs 8,000 cr FY27 EBITDA guidance; interim dividend Rs 4/share already declared.

Risks and response

• USFDA inspection outcomes at Eugia/other units (Axis flags as key risk); any OAI/warning letter would hit injectables supply.
• US injectables pricing pressure from new entrants and Lannett integration (plant at only 40% utilisation) diluting margins.
• Biosimilar launch delays (denosumab/omalizumab EMA filings) and slow ramp of the Pen-G plant leaving PLI-linked capex under-utilised.

Thesis-break conditions

Not stated separately on this page; the risk list carries the monitoring triggers.

Review history

• 8 Sep 2026 · Yash Palod · one-pager in "Why We Own What We Own" (p42) · portfolio as of $31 Jul 2026
• 31 Aug 2026 · Classification in the August top-30: Value

Source: Buoyant_Why_We_Own_What_We_Own_Sep2026.pdf (portfolio as of 31 July 2026), p42. Internal; external publication of these fields is controlled by audience policy.