ICICI Securities Goes Bullish on Aurobindo Pharma: Target Price Hiked to ₹1,350!

ICICI Securities reiterates its BUY recommendation for Aurobindo Pharma, increasing the target price to INR 1,350 from INR 1,300. The company's Q2FY26 financial results were steady, with significant contributions from its Europe vertical, which saw a growth of 17.8%, and the ARV segment, up by 68.4%. Sales in the United States reached USD 417 million, surpassing analysts' expectations, although sales of gRevlimid saw a sequential decline.

Despite facing operating costs for new projects and lower gRevlimid revenue, Aurobindo Pharma sustained an EBITDA margin of approximately 20%. The company's new ventures are progressing as planned.

Looking ahead, Aurobindo Pharma is set to commence biosimilar shipments to Europe in Q3FY26, with further biosimilar approvals anticipated in FY27. The CDMO collaboration with MSD has been expanded to include another product, with the associated plant scheduled for commercial operations in FY28. Additionally, Aurobindo Pharma is in discussions with the Indian government regarding the imposition of a Minimum Import Price (MIP) on pen-g imports, a move expected to be significantly margin-accretive (over 60% gross margin).

Management has reaffirmed its FY26 margin guidance of 20-21%, with expectations of a gradual increase to 21-22%. ICICI Securities has raised its FY27E Earnings Per Share (EPS) by approximately 2% to account for increased biosimilar sales.

Impact This news is largely positive for Aurobindo Pharma, indicating strong operational performance and promising future growth drivers. The sustained margins, upcoming product launches, and potential government policy support are key factors supporting the analyst's bullish stance and increased target price. The market is likely to react positively to these developments. Rating: 8/10

Difficult Terms: EBITDA margin: A profitability ratio that measures a company's operating profit relative to its earnings before interest, taxes, depreciation, and amortization. It shows how well a company is managing its core business operations. ARV: Antiretroviral therapy, a treatment for HIV/AIDS using a combination of antiretroviral drugs. US Sales: Revenue generated from sales in the United States. gRevlimid: A specific pharmaceutical product. Biosimilars: Biological products that are highly similar to an already approved biological product (the reference product) and show no clinically meaningful differences in terms of safety, purity, and potency. CDMO: Contract Development and Manufacturing Organization. A company that offers drug development and manufacturing services to pharmaceutical and biotechnology companies. MSD: A global healthcare company, known as Merck & Co., Inc. in the United States and Canada. FY26E / FY27E / FY28E: Fiscal Year 2026 Estimated / Fiscal Year 2027 Estimated / Fiscal Year 2028 Estimated. MIP: Minimum Import Price. A government-imposed minimum price below which imports are not allowed, typically to protect domestic industries. Pen-g: Refers to Penicillin G, an antibiotic. Gross margin accretive: Indicates that a proposed action or product will increase the company's gross profit margin.