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ICICI Securities Report
Aurobindo Pharma Ltd.'s Q3 FY26 performance came in line with expectations, supported by strong momentum in its Europe and ARV segments, along with favorable forex movement that aided overall growth and margins, according to the brokerage.
The company posted US sales of Rs 3,490 crore ($420 million), down 3.4% YoY, primarily due to the absence of gRevlimid supplies. Despite this, Aurobindo's OTC and injectable portfolios continued to register strong growth, helping offset part of the decline.
In Europe, revenues rose 11% in constant currency, while the ARV business delivered 22.5% growth, both contributing meaningfully to the quarter's consolidated performance.
The brokerage noted that Aurobindo is expected to complete the Rs 2,075 crore ($250 million) acquisition of Lannett in Q1 FY27, which may add nearly 7% to FY27 US revenue growth.
Looking ahead, performance in core geographies the US and Europe is expected to remain steady. Additionally, faster capacity utilisation at the PEN‑G and China facilities, coupled with timely biosimilar launches and scaling of the biologics contract development manufacturing organisation business, is likely to expand margins over the next two years.
Management has reiterated its FY26 Ebitda margin guidance of 20–21%. The brokerage has trimmed FY27/28 EPS estimates by around 1%, factoring in moderated expectations for US sales.
It maintains a Buy rating on the stock with a revised target price of Rs 1,490, valuing the company at 13x FY28E earnings per share
Key downside risks: Regulatory hurdles, currency volatility and delay in US launches.
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