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Beat streak continues; margin guidance raised again Compliance track-record/R&D productivity underpin long-term earnings visibility

* Rubicon Research (Rubicon) has beaten our estimates yet again, extending its consistent, long streak of beats since its IPO in Oct’25. Revenue, EBITDA, and PAT stood 5%, 11%, and 7% ahead of our estimates, respectively. Sequential revenue scale-up was also strong following the tactical measures taken in 1QFY27, with the consequent operating leverage further lifting profitability for the quarter.

* 2QFY27 revenue grew 40% YoY and 8% QoQ. This was particularly noteworthy as growth was driven by stronger traction in already commercialized products, even as the commercialization of three products approved in 2QFY27 were deferred by a quarter (since revised norms require export license applications to be made after receipt of product approval). This is expected to bode well for growth ahead as these recently approved products get commercialized.

* Rubicon has raised its FY27 EBITDA margin guidance for the second straight quarter: from 22–23% in 4QFY26 to 23%+ in 1QFY27, and now to 24%+ in 2QFY27. This also bears testimony of management’s track record of guiding conservatively and delivering ahead of expectations. Notably, the latest upgrade comes despite further opex expected from the operationalization of the Pithampur facility and likely further growthenabler costs related to the Arinna prescription business.

* All of Rubicon’s facilities have now completed USFDA inspections, with each site either classified NAI/VAI or expected to receive VAI. Every inspection except one at an R&D site was unannounced. NJ site was inspected in May’26 and EIR was received with VAI status. Pithampur site (Form 483 -2 observations) was inspected in Jul’26 and received regulatory filing approval in 1QFY27. Satara site inspection (Oct’26) had form 483 with one observation. Ambernath site inspection (Oct’26) resulted in form 483 with three observations related to system improvements and two related to product application review. All the observations of all the facilities are procedural in nature with no data integrity issues and, hence, are expected to result in a VAI status. This provides a strong testament to a robust and consistent compliance culture across the network.

* Pre-tax annualized RoACE remains remarkably strong at 36%, despite nearly 25% of capital employed (INR4b out of INR15.5b) being deployed in assets that are either pre-revenue or yet to materially contribute to returns.

* R&D productivity stands at 5.8x, based on annualized 1HFY27 revenue (exArinna), against R&D spend over the preceding nine quarters (FY23, FY24 and 1QFY25). Notably, this INR2.2b of lagged spend supporting FY27 revenue is the lowest of the last three R&D cycles. Subsequent financial years will see benefit of materially higher lagged R&D spend cycles (INR2.8b for FY28, INR3.8b for FY29, and INR5b for FY30), which, combined with a proven track record of over 5x R&D productivity, provide strong growth visibility well into FY30.

* We raise our FY27/FY28 earnings estimates by 4%/3%, factoring in faster scaleup of the existing portfolio and new launches. Rubicon brings together a rare combination of superior R&D productivity, strong execution, and a solid compliance culture. We reiterate our view that it offers the longest and strongest runway for earnings growth, not just within healthcare but across our coverage universe. We value Rubicon at 70x 12M forward earnings to arrive at a TP of INR2,090. Reiterate BUY

Highlights from the management commentary

* Rubicon received three product approvals in 2QFY27, with 90 active approved products as of Sep’26.

* In CC, revenue grew 23% YoY/5% QoQ to USD58m (Ex-Arinna) in 2QFY27.

* Specialty portfolio’s contribution to gross profit for the quarter is 36%.

* Rubicon has raised its FY27 EBITDA margin guidance for the second straight quarter: from 22–23% in 4QFY26 to 23%+ in 1QFY27, and now to 24%+ in 2QFY27.

* Rubicon received three USFDA approval in 2QFY27. The commercialization was deferred by a quarter due to revised norms w.r.t export licenses. This makes the strong sequential revenue performance in 2QFY27 even more commendable.

* The company delivered strong profitability performance despite operative expense associated with three facilities (Pithampur, CSN and New Jersey), which are yet to contribute to revenue.

* Pithampur is expected to generate revenue from FY28 onwards. New Jersey commercialization is also expected in FY28 and is function of product filings, regulatory inspection and subsequent launches.

Reiterate BUY

* We raise our FY27/FY28 earnings estimates by 4%/3%, factoring in faster scaleup of the existing portfolio and new launches. Rubicon brings together a rare combination of superior R&D productivity, strong execution, and a solid compliance culture.

* We reiterate our view that it offers the longest and strongest runway for earnings growth, not just within healthcare but across our coverage universe. We value Rubicon at 70x 12M forward earnings to arrive at a TP of INR2,090. Reiterate BUY.

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