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Muted US sales

Aurobindo Pharma’s (ARBP) Q4FY26 EBITDA of INR 18bn (flat YoY) was in line with our estimate. The company has maintained its 21% OPM guidance for FY27E. Both Eugia facilities have got OAI status which has ~40% of pending ANDAs. Any adverse reactions could hurt US sales growth trajectory. In near term ramp up in PenG facility, Vizag pant commercialization will be key. We believe ARBP has multiple growth drivers in place with investments in vaccines, injectables, biosimilars and PLI which are expected to be reflected from FY27E/FY28E. Our FY27E and FY28E EPS broadly remain unchanged. The stock is currently trading at 9.7x EV/EBITDA and 17.8x P/E on FY28E. Given recent up in stock price and expensive valuations; we downgrade stock to “Hold” from “Buy” with revised TP of INR 1,400/share; valuing at 17x FY28E EPS.

Revenues below est, weak US business:

Overall Revenue came in at INR 88.5bn, up 5.6% YoY, (we est INR 87.9bn). US revenues stood at USD 387mn, down 8% QoQ and 18% YoY (we est USD 426mn). Mgmt cited ex gRevlimid improvement in base business was visible YoY. EU sales up 30% YoY to INR 28bn, beat our est. ARV formulations up 6% YoY whereas RoW sales were up 25% YoY. API sales improved by 13% YoY.

In line EBITDA:

Gross margins remain healthy at 61% (up 153 QoQ and 216bps YoY). R&D spent stood at INR 4bn (4.5% of revenue), down 5% YoY. Other expenses ex R&D were up 11% QoQ. Resultant EBITDA margins came in at 20.3%, flat QoQ. EBITDA stood at INR 18bn (flat YoY); we estimate INR 18.2bn. Tax rate stood 28.6%. There was forex loss of INR 482mn. Adj PAT at INR 9.7bn. Reported adj EPS of INR 15.8/share for Q4FY26.

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