On Tuesday, a Kotak analyst increased the price target for Aurobindo Pharma (ARBP:IN) shares to INR1,175, up from the previous target of INR980, while maintaining an Add (2) rating on the stock.
The revision follows Aurobindo Pharma's first-quarter financial performance for the fiscal year 2025, which revealed an 8% EBITDA miss compared to Kotak Institutional Equities' estimates.
The shortfall in EBITDA was attributed primarily to extended disruptions at the Eugia III facility, which impacted sales and costs more than anticipated. However, Aurobindo Pharma has indicated expectations for a return to normal sales and cost levels starting from the second quarter of FY2025.
The analyst's outlook for Aurobindo Pharma includes several potential growth drivers. These include the commencement of operations at the Pen-G plant, increased activity in biosimilars, and contract manufacturing operations (CMO) for biologics.
These factors are expected to contribute to an approximate 13% adjusted earnings per share (EPS) compound annual growth rate (CAGR) for Aurobindo Pharma from FY2024 through FY2027E.
Despite these growth prospects, the analyst notes that current valuations, at approximately 19 times the FY2026 estimated earnings, reflect the positive outlook. Additionally, ongoing regulatory challenges are a persistent concern for the company.
In conclusion, while acknowledging the potential for medium-term growth, the analyst reiterates a Sell rating on Aurobindo Pharma's shares, cautioning investors about the company's valuation and regulatory hurdles that could affect its performance.
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