Aurobindo Pharma: Target Price of Rs 1400 Set by Prabhudas Lilladher

Aurobindo Pharma Maintains Guidance, Faces Challenges in US Market

Aurobindo Pharma's (ARBP) fourth quarter fiscal year 2026 (Q4FY26) earnings before interest, taxes, depreciation, and amortization (EBITDA) of INR 18 billion remained flat year-over-year (YoY), aligning with Prabhudas Lilladher's research estimate. The company has continued to maintain its 21% operating profit margin (OPM) guidance for fiscal year 2027 (FY27E).

Eugia Facilities Receive OAI Status

Two Eugia facilities have obtained Out-of-Phase Inspection (OAI) status, which covers approximately 40% of pending Abbreviated New Drug Applications (ANDAs). This development poses a risk to the company's US sales growth trajectory, as any adverse reactions could impact business. However, the near-term ramp-up in the PenG facility and the commercialization of the Vizag plant are expected to be key drivers.

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Multiple Growth Drivers in Place

Aurobindo Pharma has invested in various growth drivers, including vaccines, injectables, biosimilars, and the Production Linked Incentive (PLI) scheme. These investments are expected to be reflected in the company's earnings from fiscal year 2027 (FY27E) to fiscal year 2028 (FY28E). As a result, Prabhudas Lilladher's earnings per share (EPS) estimates for FY27E and FY28E remain largely unchanged.

Valuation and Recommendation

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The stock is currently trading at 9.7x enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) and 17.8x price-to-earnings (P/E) on FY28E. Given the recent increase in stock price and expensive valuations, Prabhudas Lilladher has downgraded the stock to a "Hold" rating from "Buy" with a revised target price of INR 1,400 per share, valuing the company at 17x FY28E EPS.