Motilal Oswal retains 'Buy' on Aurobindo Pharma as FY26-28 prospects shine

Tushar Manudhane, Vipul Mehta, and Eshita Jain, research analysts at MOFSL, value Aurobindo Pharma at 16 times 12-month forward earnings, assigning a target price of ₹1,430

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Analysts at Motilal Oswal Financial Services (MOFSL) remain bullish on pharmaceutical major Aurobindo Pharma, projecting an 18 per cent upside potential in the stock. 

 

The brokerage expects Aurobindo Pharma to achieve a compound annual growth rate (CAGR) of 9 per cent in sales, 14 per cent in earnings before interest, taxes, depreciation, and amortisation (Ebitda), and 21 per cent in profit after tax (PAT) over FY26–28. 

 

The growth trajectory, analysts said, is expected to be supported by a 9 per cent sales CAGR in the US and 14 per cent in the European and rest-of-world markets, coupled with a 90-basis-point margin expansion and lower financial leverage.

Valuation and core strengths

Tushar Manudhane, Vipul Mehta, and Eshita Jain, research analysts at MOFSL, value ARBP at 16 times 12-month forward earnings, assigning a target price of ₹1,430. 

ARBP has the highest US generics sales among listed Indian companies, backed by the maximum number of ANDA approvals. Product development and backward integration in manufacturing have supported healthy profitability despite persistent, though moderating, price erosion.

 

“ARBP has strengthened growth levers, including the accelerated scale-up of the Pen-G/6APA complex toward full utilisation; stable growth in the Europe business led by a deeper portfolio and capacity scale-up; expanding biosimilar approvals and targeted acquisitions; meaningful biosimilar commercialisation across Europe and the US as CuraTeQ’s late-stage pipeline begins to monetise; and the CMO partnership with MSD,” the brokerage noted in its report.  CATCH STOCK MARKET LIVE UPDATES TODAY

Pen-G/6-APA expansion and policy tailwinds

With investments of ₹35 billion made to date in the Pen-G/6-APA project and support under the PLI scheme, Aurobindo Pharma is scaling up production to enhance India’s self-sufficiency in bulk drugs and intermediates used for Beta-Lactam antibiotics, MOFSL said.

 

The minimum import price (MIP), if implemented by the government, analysts believe, would further bolster ‘Make in India’ initiatives and reduce reliance on Chinese suppliers.

Biosimilars as a long-term growth driver

According to the brokerage, biosimilars remain a long-term growth driver, backed by CuraTeQ’s late-stage pipeline, EU GMP-certified integrated manufacturing, multiple Phase-3 programmes with efforts to secure regulatory waivers, and approved products already commercial in Europe, with a significant monetisation inflection expected from FY27–28.

 

MOFSL further highlighted that diversification across Europe and biologics contract manufacturing are adding new growth vectors, supported by rising EU revenue contribution, capacity ramp-up at the China OSD facility, targeted acquisitions, and the expanding biologics CMO partnership with Merck Sharp & Dohme (MSD).

Multiple engines to support growth outlook

Beyond Pen-G, biosimilars, and EU opportunities, analysts believe the injectables pipeline and the integration of Lannett will help ARBP deliver a CAGR of 9 per cent/14 per cent/21 per cent in revenue/Ebitda/PAT over FY26–28.  (Disclaimer: The views and investment tips expressed by the brokerage in this article are their own and not those of the website or its management. Business Standard advises users to check with certified experts before taking any investment decisions.)