Aurobindo Pharma soars 6% on huge volumes; here's what triggered the rally

Aurobindo Pharma stock up on Friday: The government has imposed a Minimum Import Price fixed at ₹2,216/kg for Penicillin G and is expected to provide a significant benefit to the company.

Aurobindo Pharma share price today

 

Share price of Aurobindo Pharma soared 6 per cent to ₹1,214.45 on the BSE in Friday’s intra-day trade amid heavy volumes after the Government imposed a Minimum Import Price fixed at ₹2,216/kg for Penicillin G and is expected to provide a significant benefit to the company.

 

The stock price of the pharmaceutical company was quoting higher for the third straight day, gaining 7.5 per cent during the same period.

 

At 12:54 PM; Aurobindo Pharma stock was quoting 3 per cent higher at ₹1,187.70, as compared to 0.5 per cent decline in the BSE Sensex. The average trading volumes at the counter jumped multiple-fold today. A combined 5.58 million equity shares representing nearly 1 per cent of the company changed hands on the NSE and BSE.  FOLLOW STOCK MARKET UPDATES TODAY LIVE

 

Why did Aurobindo Pharma stock rally 6% on Friday?

 

The Centre on Thursday amended its import policy by notifying minimum import price (MIP) curbs for certain key pharmaceutical inputs to combat aggressive undercutting and dumping by Chinese manufacturers, the Business Standard reported.

 

In a notification dated January 29, the Directorate General of Foreign Trade (DGFT) introduced a minimum import price (MIP) on important bulk drugs such as Penicillin G potassium (Pen-G), Amoxicillin Trihydrate and 6-APA for a period of one year.

 

The government has shifted Penicillin G, 6-APA and Amoxicillin from the free to the restricted import category if imported at prices below the prescribed thresholds. Minimum Import Prices (MIP) have been fixed at ₹2,216/kg ($24) for Penicillin G, ₹2,733/kg ($30) for Amoxicillin, and ₹3,405/kg ($37.01) for 6-APA. The measure takes effect immediately and will remain in force for one year, until January 2027.

 

MIP of Penicillin at $24 is expected to provide significant benefit for Aurobindo. ICICI Securities in a note said that the brokerage firm estimates suggest that at $17 per KG, the company is expected to achieve the Breakeven level. Out of the 15,000 tonnes that the company has earmarked as PenG capacity, 6,000 tonnes are for merchant sales. The brokerage firm further said that they will get some more clarity from the management. Prima facie this could be a significant opportunity, it added.  ALSO READ | Laxmi Organic share price hits record low on weak Q3 operational performace 

Minimum import duties on Pen-g, 6-APA, and amoxicillin sales are expected to boost Aurobindo Pharma’s overall performance over the next one year, according to analysts at Motilal Oswal Financial Services (MOFSL). 

 

Aurobindo Pharma is implementing multiple growth drivers by building a product pipeline for developed markets as well as capacities across the manufacturing value chain. It has the highest ANDA filings for the US market in the India-listed space. While the goal is to have compliance in place for successful product approvals across sites, the resolution of regulatory issues at Eugia – III remains the key for injectable launches.

 

The implementation of the MIP provides an overall benefit of ₹550 crore-₹660 crore, comprising economies of scale and production-linked income from the government of India. In addition, the import of 6-APA is expected to shift to domestic production to a great extent, paving the way for ‘Atmanirbhar Bharat’.

 

Based on new approvals and market share gains in the US market, superior execution in EU markets, and the implementation of the PEN-G project under the PLI scheme, MOFSL expects a 9 per cent/14 per cent/21 per cent CAGR in revenue/EBITDA/PAT over FY26-28. The brokerage firm values Aurobindo Pharma at 16x 12M forward earnings to arrive at a target price of ₹1,430 while reiterating a 'BUY' rating on the stock.  ===========================  Disclaimer: View and outlook shared on the stock belong to the respective brokerages and are not endorsed by Business Standard. Readers discretion is advised.