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On Wednesday, ICICI Securities adjusted its stance on Aurobindo Pharma (NSE:ARBN) (ARBP:IN), downgrading the stock from ’Buy’ to ’Add’ and reducing the price target to INR 1,330 from INR 1,445. The revision followed the company’s fourth-quarter financial results for fiscal year 2025, which aligned with the firm’s projections. However, the earnings before interest, taxes, depreciation, and amortization (EBITDA) and profit after tax (PAT) figures were impacted by an unexpected expense of INR 1.05 billion. This one-off cost was attributed to reduced Production Linked Incentive (PLI) scheme incentives, increased power and fuel expenses, and operational costs at the company’s Pen-G and China facilities.
The revenue forecast for fiscal year 2026 appears challenging for Aurobindo Pharma, with expected price competition in its generic version of the drug Revlimid and a delay in commercial revenue from the PLI project, which is anticipated to take an additional 4-6 months to commence. Despite these hurdles, the company’s subsidiary Eugia is poised to introduce a promising pipeline of limited competition products in fiscal year 2027, and the biosimilars business is projected to accelerate during the same period.
Aurobindo Pharma’s management has provided guidance for fiscal year 2026, projecting high single-digit revenue growth, excluding the generic Revlimid, and an EBITDA margin that is anticipated to remain flat at around 21%. In light of these projections, ICICI Securities has revised its earnings per share (EPS) estimates for fiscal years 2026 and 2027, decreasing them by approximately 15% and 10%, respectively.
The decision to downgrade the stock rating to ’Add’ and lower the price target was influenced by the anticipated delay in the ramp-up of the PLI project. The new target price is based on a multiple of 16 times the estimated EPS for fiscal year 2027, as outlined by ICICI Securities in their analysis of Aurobindo Pharma’s financial outlook.
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