Aurobindo Pharma shares get a buy call despite 25% fall from record high

Shares of Aurobindo Pharma rose over 3% on Monday, May 12, following an upgrade from brokerage firm Motilal Oswal, which pointed to attractive valuations. The firm has changed its recommendation for Aurobindo Pharma to 'Buy' and set a price target of Rs 1,360, suggesting a potential upside of 17% from Friday's closing price. However, this target remains significantly lower than Aurobindo Pharma’s record high of Rs 1,592 reached in September last year, with the stock currently down almost 25% from that peak.

Aurobindo Pharma stock touched an intraday high of Rs 1,203 today, over 3% higher to the previous close. Aurobindo Pharma share is trading lower than 5 day, 10 day, 150 day, 200 day but higher than the 20 day, 50 day and 100 day moving averages.

The stock has fallen 5.46% in six months and lost 11.29% since the beginning of this year. 

Total 0.33 lakh shares changed hands amounting to turnover of Rs 3.87 crore on BSE.

Market cap of the firm rose to Rs 69,629 crore on BSE.

The brokerage noted that following a correction of 12-13% over the last six months, the current valuations for the stock appear appealing.

Motilal highlighted that Aurobindo Pharma is making substantial investments in various high-growth segments to ensure sustained growth over the next 3-5 years. The company’s Penicillin G project is making considerable progress, reducing operational losses, and is anticipated to significantly contribute to profitability in FY26 and FY27.

In the competitive landscape of the US generics market, Aurobindo Pharma is bolstering its position by adding products with limited competition to its offerings. Additionally, the company is venturing into peptides and biosimilars, all while enhancing its manufacturing capabilities to support long-term growth.

Aurobindo Pharma is noted for having the most diversified generics portfolio in the US, showcasing its resilience against pricing pressures within a $2.1 billion revenue framework.

Moreover, its focus on differentiating capabilities and facilities catering to regulated markets places the company in a strong position for ongoing growth.

After an impressive FY24, the company is projected to achieve moderate year-on-year earnings growth of 10% in FY25, partly due to operational setbacks from the PEN-G product and production delays at Eugia III related to regulatory concerns.

The brokerage has outlined key risks, including the potential impact of unfavorable US tariff policies on imports that could affect Motilal’s projections. Additionally, delays in critical approvals may constrain earnings growth.