RPG Life Sciences gains domestic formulations momentum and API expansion funding

Investment View and Recommendation

ICICI Direct Research’s August 3, 2026 result update maintains a BUY recommendation on RPG Life Sciences, with a target price of Rs 3,340 versus the current market price of Rs 2,790. The broker views the company as a compelling domestic-formulations play, supported by strong Q1 FY27 performance and an increasingly strategic API business.

Business Profile and Revenue Mix

RPG Life Sciences operates across branded domestic formulations, international formulations or global generics, and synthetic APIs. It has three API and formulations manufacturing units in Ankleshwar, Gujarat, and Navi Mumbai, Maharashtra.

In Q1 FY27, domestic formulations accounted for 68% of revenue, international formulations for 18%, and APIs for 14%.

Strong Q1 FY27 Performance

Reported Q1 FY27 sales rose 15.8% year-on-year and 10.6% quarter-on-quarter to Rs 195.7 crore. Domestic formulations revenue increased 15% year-on-year to Rs 132.5 crore, API revenue rose 36% to Rs 26.6 crore, and international formulations revenue grew 8% to Rs 35 crore.

EBITDA increased 22% year-on-year and 31.9% quarter-on-quarter to Rs 43.3 crore. EBITDA margin expanded by 112 basis points year-on-year and 356 basis points sequentially to 22.1%. PAT was Rs 30.8 crore, up 17% year-on-year and 2.9% sequentially. ICICI Direct states that quarterly performance was better than its expectations.

Domestic Formulations Growth Strategy

The broker attributes domestic-formulations growth to strong performance in key therapies and new launches in specialty and chronic segments. ICICI Direct expects higher salesforce productivity and a rising contribution from specialty and chronic launches to sustain domestic-formulations traction.

RPG Life Sciences has identified five domestic-formulations growth pillars:

• Rejuvenating the portfolio through chronic and specialty launches.
• Building assets through line extensions.
• Expanding medical-representative coverage.
• Improving medical-representative productivity.
• Improving profitability through expense optimisation and sales hygiene.

API Business Restructuring and Expansion

The API business maintained momentum as a unit returned after a hiatus. InvAscent has invested Rs 243 crore for a 40% stake in RPG Life Sciences’ demerged API business, implying an approximately Rs 607.5 crore valuation, or about 4.5 times FY28E sales before the Actis acquisition.

InvAscent and RPG Life Sciences have committed approximately Rs 700 crore for organic and inorganic expansion. RPG Life Sciences has also acquired Actis Generics for Rs 80 crore. Actis had approximately Rs 48 crore of FY25 revenue and brings expertise in high-value, low-volume complex-chemistry APIs, where the broker notes lower competition and limited price erosion. The company has also added an experienced API leadership team.

ICICI Direct believes these measures can make APIs a meaningful medium-term growth driver and may create scope for value unlocking.

Financial Forecasts and Valuation

ICICI Direct forecasts revenue of Rs 816.6 crore in FY27E and Rs 923.7 crore in FY28E, implying a 14% revenue CAGR over FY26 to FY28E. It estimates EBITDA of Rs 184.3 crore and Rs 228.9 crore, respectively, with EBITDA margin improving from 20.8% in FY26 to 22.6% in FY27E and 24.8% in FY28E.

The Rs 3,340 target price is based on 34 times FY28E EPS, excluding Actis. ICICI Direct considers the premium valuation, in line with pharma MNCs, justified by RPG Life Sciences’ domestic-formulations opportunity.

Key Risks

• Higher-than-expected competition in top brands.
• Slower-than-expected traction from new launches.