Aurobindo Pharma (ARBP) Research Report

Key Highlights

• ARBP's PEN-G plant is driving throughput and margin expansion through large-scale fermentation and 6-APA conversion, backed by policy support from the Production-Linked Incentive (PLI) scheme.
• The plant has a substantial fermentation capacity of ~7,600 KL and features backward integration extending to glucose manufacturing.
• ARBP is forward integrated to manufacture 6-APA and is in the process of further forward integration to produce amoxicillin and other APIs that require PEN-G as a raw material.

Business Outlook

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We project an EBITDA of INR5.5-INR6.6b from the PENG project over the next 12 months, driven by robust operational efficiency and financial support from the Government of India.

Valuation and Recommendation

We expect a 21% earnings CAGR over FY26-28, aided by biosimilars/EU market prospects and benefits from the PLI-led PENG project and the integration of Lannett. Our valuation is based on a multiple of 16x 12M forward earnings, resulting in a Target Price (TP) of INR1,500. We reiterate a BUY recommendation for ARBP.