Aurobindo Pharma: Muted sales growth in June quarter

EBITDA (-1% YoY) was 4%/7% lower than our/consensus estimates, driven by muted sales growth of 4% YoY (US down 13% QoQ on a sharp drop in gRevlimid sales, which was offset by 18% YoY growth in EU), lower gross margin (-56 bps YoY), and higher staff/R&D costs (+15%/8% YoY).

Excluding gRevlimid and losses related to the Pen-G plant, EBITDA growth was ~12% YoY. The company expects (1) to sustain growth momentum in the US OSD business led by new launches, (2) to sustain EBITDA margin at 20–21% in FY26, (3) to see steady growth for the injectable business (new launches, gradual normalization in Eugia unit-3), (4) drop in gRevlimid sales in 9MFY26; it targets market share gains once the market opens for generics in Feb’26, (5) the EU to sustain growth and EBITDA momentum in FY26, (6) the launch of three biosimilars in the EU market in H2FY26, and (7) new plants (China, Pen-G, Vizag, and US-based plant) to generate EBITDA contribution over the next 1–2 years.

Factoring in the Q1 miss, we have cut EPS by 7%/3% for FY26/27E and revised the TP to INR 1,230 (16x Q1FY28E). ADD stays.

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Source: HDFC Securities Institutional Equities

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