Aurobindo Pharma earnings beat as Europe growth and biologics scale-up advance

Investment View and Valuation

Motilal Oswal Financial Services’ August 6, 2026 results update retains its Buy recommendation on Aurobindo Pharma. The broker’s thesis is that resilient US and European generics operations are being complemented by emerging growth engines in biosimilars and contract manufacturing. Motilal Oswal expects earnings per share to grow at a 21% CAGR over FY26-FY28 as these platforms develop alongside the base generics business.

The broker largely maintained its FY26 and FY27 estimates and values Aurobindo Pharma at 20 times 12-month forward earnings to derive a target price of Rs 1,860.

1QFY27 Financial Performance

Aurobindo Pharma reported consolidated 1QFY27 sales growth of 16.3% year on year to Rs 9,150 crore, essentially in line with Motilal Oswal’s estimate of Rs 9,163 crore. EBITDA rose 20% year on year to Rs 1,924 crore, exceeding the broker’s estimate of Rs 1,824 crore by 5.5%. EBITDA margin expanded 60 basis points year on year to 21.0%, compared with the 19.9% estimate.

Gross margin improved 160 basis points to 60.4%, aided by business mix. Adjusted profit after tax increased 27.7% to Rs 1,054 crore, around 8% above the broker’s estimate. Reported exceptional costs included Rs 43 crore from derecognition of lease receivables and Rs 40 crore of costs related to acquiring Lannett.

Segment Performance

Formulation sales grew 16.5% year on year to Rs 8,100 crore. US formulation revenue increased 8.1% to Rs 3,770 crore, or 2.6% in constant currency to USD399 million excluding gRevlimid, and represented around 41% of sales. European formulation sales rose 25.6% to Rs 2,940 crore, or 10.8% in constant currency. Management indicated that Europe had achieved EBITDA margin above 20%.

Growth Markets sales increased 37.7% to Rs 1,060 crore, while API sales rose 14.5% to Rs 1,049 crore. ARV revenue declined 6.9% to Rs 330 crore. Aurobindo Pharma received 10 ANDA approvals during 1QFY27.

Management Guidance and Near-Term Outlook

Management reiterated FY27 guidance for double-digit revenue growth, EBITDA margin above 21% and absolute EBITDA above Rs 8,000 crore. It guided FY27 R&D spending of Rs 1,400-1,500 crore, broadly consistent with the 1QFY27 run rate of Rs 350 crore, or around 4% of revenue. Management expects double-digit European growth in FY27.

Eugia is expected to generate more than USD500 million of revenue in FY27, with single-digit growth.

Lannett Acquisition and Manufacturing Opportunities

The Lannett acquisition closed on June 29, 2026 after US FTC approval and a USD250 million payment. Motilal Oswal views the acquired US manufacturing facility as a route to controlled-substances and government-demand opportunities.

Management expects Lannett to benefit from SG&A rationalisation, procurement savings and manufacturing transfers over the next 9-12 months. The Advair launch through Lannett remains scheduled for August 2026, while Lannett capacity utilisation was around 40%.

Biosimilars and Biologics CDMO Platform

The broker highlights the biologics platform as a medium- to long-term growth lever. Four biosimilars—Pegfilgrastim, Filgrastim, Bevacizumab and Trastuzumab—are commercialised. Denosumab has been filed with the EMA, while Omalizumab is targeted for an EMA filing in 3QCY26. Initial US FDA filings for Omalizumab, Denosumab and Bevacizumab are expected in CY26.

TheraNym Unit-1 is expected to begin qualification by November 2026, with validation batches in CY27 and commercial revenue expected from CY28. Unit-2 entails a USD180 million investment for 60,000 litres of capacity and is targeted for qualification by 2030.

The MSD partnership supports visibility for biologics CDMO revenue, although meaningful CMO scale-up is expected from FY29 onwards.

Broker Estimates