Motilal Oswal has upgraded Aurobindo Pharma Ltd. to a 'buy' rating with a target price of Rs 1,360, highlighting the company's promising growth trajectory and strategic investments across multiple high-potential segments. The brokerage highlighted the company's efforts to drive sustained growth over the next few years.
Aurobindo Pharma is actively investing in various segments to ensure long-term growth. The company's Penicillin G (PEN-G) project is scaling up and is expected to contribute materially to profitability in FY26 and FY27. "The Penicillin G project is scaling up meaningfully, effectively curbing operational losses."
In the US generics market, Aurobindo Pharma continues to strengthen its position by consistently adding limited competition products to its portfolio, Motilal said. "Aurobindo Pharma stands out for having the most diversified US generics portfolio, demonstrating resilience against pricing pressure," the brokerage said.
Beyond generics, the company is expanding into peptides and biosimilars, while simultaneously building the necessary manufacturing capacities to support long-term growth.
Motilal Oswal has raised its earnings estimate for Aurobindo Pharma by 4-3% to factor in a faster scale-up in PEN-G. "We raise our earnings estimate to factor in a faster scale-up in PEN-G, niche launches, and improved operating leverage," the report states.
The firm projects a 17% earnings Compound Annual Growth Rate over FY25-27. With the stock correcting 12-13% over the past six months, current valuations appear attractive.
"Any adverse policies with respect to US tariffs on imports could impact our estimates. Additionally, delays in key approvals may keep earnings growth under check," Motilal Oswal said.
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