Aurobindo Pharma (ARBN.BO): Lower R&D Spends Offset Weak Underlying Trends; FX Tailwind Largely Played Out, Maintain Sell

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06 Aug 2026 08:15:42 ET │ 13 pages

Aurobindo Pharma (ARBN.BO)

Lower R&D Spends Offset Weak Underlying Trends; FX Tailwind Largely

Played Out, Maintain Sell

CITI'S TAKE

Aurobindo’s 1Q numbers were slightly ahead of expectations, but the beat

was largely driven by lower R&D spend as well as favorable currency

movements, which offset weak underlying constant-currency growth (~45% YoY). The company maintained its FY27E EBITDA guidance of

~Rs80bn, albeit with lower R&D spends (~8-10% lower YoY). We maintain

our Sell rating on the stock, driven by (a) valuations at 20x FY28E EPS

(c.30% premium to the historical average), (b) growth challenges in the

flagship US business, and (c) currency benefits having largely played out.

Our detailed thesis (July'2026).

Results summary — Aurobindo’s 1Q adjusted EBITDA of Rs19.2bn was ~3% ahead

of Citi’s estimate of Rs18.7bn, largely driven by lower R&D spend at 3.8% of sales,

which was ~100bps lower, versus the ~5% average seen over the past 3-4 years.

Revenue grew 16% YoY to Rs89.5bn, with strong growth in Europe (+26% YoY, +11%

CC) and Emerging Markets (+38% YoY, +26% CC) offsetting weaker US trends (+8%

YoY, -2% CC). EBITDA increased 20% YoY to Rs19.2bn, with EBITDA margin

expanding 60bps YoY and 70bps QoQ to 21%, primarily due to the lower R&D spend.

Adjusted PAT came in at Rs10.5bn.

Sell

Price (06 Aug 26 15:30)

Rs1,589.50

Target price

Rs1,270.00

Expected share price return

-20.1%

Expected dividend yield

0.4%

Expected total return

-19.7%

Market Cap

Rs914,563M

US$9,615M

Vivek Agrawal, CFAAC

Non-US markets continue to counter US headwinds — US trends remained

subdued, with constant currency sales declining 2% YoY (+3% ex-Revlimid) and

quarterly revenues tracking at the lower end of the past three years (Fig 1),

highlighting the limitations of volume-led growth amid modest progress in complex

generics and injectables. While Lanett could contribute ~US$60m per quarter,

management indicated that any meaningful acceleration in US growth will depend

on a stronger pace of new product launches. In contrast, non-US markets continued

to drive growth, with Europe and Emerging Markets growing 25.6% and 37.7% YoY,

respectively.…