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Resumption of PenG plant remains key trigger

Quick Pointers:

* FY26 guidance with high single digit revenue growth ex Revlimid and flat OPM.

* Awaiting approval from local pollution board to re-start PenG facility.

Aurobindo Pharma’s (ARBP) Q4FY25 EBITDA of Rs17.9bn (up 6% YoY) was in line with our estimate. FY26 guidance of high single digit revenue growth ex gRevlimid with flat margins was below our estimate. Resultant our FY26 and FY27E EPS stands reduced by 4-5%. Other expenses remained elevated on the back of higher PenG-related operational cost and supply disruptions due to ongoing remediation. However, we expect margins and revenues to improve from H2FY26/FY27 with ramp up in PenG facility, Vizag pant commercialization and launches in US. We believe ARBP has multiple growth drivers in place with investments in vaccines, injectables, biosimilars and PLI which are expected to be reflected from FY26. Given attractive valuations (8x EV/EBITDA / 14.5x P/E on FY27E), we maintain our “Buy” with revised TP of Rs1,440/share; valuing at 18x FY27E EPS.

* Higher revenues aided by EU & US: Overall Revenue came in at Rs8bn, up 11% YoY, 4% beat to our estimate. US revenues ex Puerto Rico increased 11% QoQ. In CC terms US revenues were up by 8% QoQ at $471mn, aided by gRevlimid sales. EU sales were up 17% YoY while RoW business was down 8% YoY. ARV formulations came in higher (up 29% YoY). API sales increased 5% YoY.

* EBIDTA in line, Rs1.1bn one off expenses: Gross margins came in higher at 59.1% (up 70bps QoQ). R&D spent stood at Rs 4.2bn (5% of revenue), up 8% YoY. Other expenses ex R&D came in higher, up 12% YoY and up 8% QoQ. Resultant EBITDA margins came in at 21.4% up 100bps QoQ. There were Rs1.1bn one off expenses booked in COGS and opex. EBITDA came at Rs17.9bn (up 6% YoY), in line with our estimates. Forex gain during the quarter stood at Rs 116mn. Resultant PAT at Rs9bn; down 1% YoY

* Key concall takeaways: US: Business was largely driven by price stability and volume gains. Mgmt cited Q4 achieved higher gRevlimid sales. FY26 gRevlimid sales will be lower than FY25. Strong portfolio helped maintain price stability despite challenges. There are certain oncology products going off patent which will drive US OSD in FY26/27. Launched 5 products and filed 9 ANDAs during the quarter. Vizag plant -Unit 5 -Four lines are present with 10 products being filed in the US. FY27 will be meaningful year. Guided muted growth for Eugia business in FY26 as unit 3 is yet to be cleared by USFDA. Europe: Growth supported by strong day 1 launches, efficient supply chain, capacity additions (Vizag, China). Guided for high single digit growth in EU market in FY26. Biosimilars ~$400mn invested in biosimilars so far. Got 4 approvals which include Beva, Deno. FY28 will be inflection point for biosimilar business. China plant incurred Rs350mn loss in FY25 but expects significant revenue contribution over next 2-3 year towards US and EU market. PenG - Preliminary fire assessment at Kakinada Pen-G plant shows ~Rs40mn impact. Awaiting approval from local pollution board to re-start PenG facility. Guided for potential EBITDA of Rs10bn p.a from PenG. Margin -The company remains on track to achieve similar EBITDA margin for FY26E. Average finance cost was 5.5%, while net cash of $42mn vs net debt of $84mn in Q3FY25. Other: Continued focus on backward integration. Tax rate to remain in 28-30% range in FY26E. Tariff: July 2025 tariff announcements (company awaiting clarity).

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