Stock to Buy: Pharma stock that can deliver returns of up to 22%; Do you own it?

SYNOPSIS: Aurobindo Pharma is expected to deliver strong FY26–28 growth, driven by US and EU momentum, biosimilars, Pen-G scale-up, and margin expansion, prompting Motilal Oswal to reaffirm its buy rating with upside potential.

Shares of an integrated global pharmaceutical company involved in developing, manufacturing, and marketing a wide range of generic pharmaceuticals and APIs are in focus on the stock exchanges, after Motilal Oswal expects the company to deliver a CAGR of 21 percent in net profit over FY26-28 on the back of demand in the US and EU/ROW markets.

With a market cap of Rs. 67,861 crores, shares of Aurobindo Pharma Limited were trading in the red at Rs. 1,168.4 on BSE, down by around 1 percent on Tuesday morning’s trading session, as against its previous closing price of Rs. 1,176.65. The stock has delivered negative returns of around 6 percent in one year, but has gained by over 1 percent in the last one month.

Brokerage Target & Outlook

Domestic brokerage firm Motilal Oswal Financial Services has reiterated its “buy” rating on Aurobindo Pharma Limited, assigning a target price of Rs. 1,430 per share, implying a potential upside of around 22 percent from its current price levels. The brokerage values the stock at 16x 12-month forward earnings.

The brokerage expects Aurobindo Pharma to post a 9 percent sales CAGR, 14 percent EBITDA CAGR, and 21 percent net profit CAGR during FY26-28, driven by solid sales growth in the US (9 percent) and EU/ROW markets (14 percent), along with anticipated margin improvement of around 90 bps and reduction in financial leverage.

Aurobindo remains the largest US generics player among listed Indian companies, backed by the highest number of ANDA approvals and resilient profitability achieved through strong product development and backward integration despite pricing pressure.

Growth visibility is further reinforced by multiple strategic drivers, including the scale-up of the Pen-G/6-APA complex, where the company has already invested over Rs. 3,500 crore and is supported by the government’s PLI scheme; expanding momentum in Europe driven by portfolio depth, capacity additions and biosimilar approvals; and the commercialisation of CuraTeQ’s late-stage biosimilar pipeline across Europe and the US.

Additional catalysts include its biologics CMO partnership with Merck Sharp & Dohme (MSD), capacity ramp-up at the China OSD facility, targeted acquisitions, and the strengthening injectables portfolio aided by Lannett’s integration. Policy support through a potential Minimum Import Price (MIP) for key drug intermediates could further boost domestic manufacturing competitiveness and reduce reliance on China. With these diversified growth levers in place, Motilal Oswal maintains its bullish stance on Aurobindo Pharma.

Financials & More

Aurobindo Pharma Limited is principally engaged in the business of manufacturing and marketing of active pharmaceutical ingredients, generic pharmaceuticals, branded pharmaceuticals and related services.  

Aurobindo Pharma reported a significant growth in revenue from operations, experiencing a year-on-year increase of more than 6 percent, from Rs. 7,796 crores in Q2 FY25 to Rs. 8,286 crores in Q2 FY26. Likewise, the company’s net profit increased during the same period, from Rs. 817 crores to Rs. 848 crores, reflecting a marginal increase of around 4 percent YoY.

In Q2 FY26, the company’s US revenue (excluding Puerto Rico) rose 2 percent sequentially, contributing 43.9 percent to consolidated revenue, supported by robust base-business growth even as transient product sales declined.

Written by Shivani Singh

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