JM Financial sees up to 28% upside in Dr Reddy’s and Aurobindo Pharma. Should you buy?

JM Financial sees upside of up to 28% in shares of Dr Reddy's Laboratories and Aurobindo Pharma over the next 12 months, retaining its Buy ratings on both drugmakers amid expectations of stronger earnings growth and business diversification.

The brokerage maintained its Rs 1,489 target for Dr Reddy’s, implying 27.7% upside, and raised Aurobindo Pharma’s target by 4.3% to Rs 1,975, indicating a potential gain of 17.6%.

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Why JM Financial is bullish on Dr Reddy's

JM Financial believes Dr Reddy’s is becoming a more diversified pharmaceutical company, with the US now contributing around 25% of revenue versus nearly 50% earlier. Branded businesses account for more than half of overall sales, which provides greater earnings stability.

JM Financial expects earnings per share to reach around Rs 80 in FY28 and Rs 91 in FY29, while the EBITDA margin could recover to 25% by FY29. The brokerage values the stock at 18 times its estimated June 2028 earnings.

Key growth drivers include the planned semaglutide relaunch in November 2026, the potential launch of intravenous Abatacept in the fourth quarter of FY27, stronger growth in India and the expansion of consumer health.

The company has identified the manufacturing issue that affected semaglutide production, although successful validation remains critical to the relaunch. Abatacept is another significant opportunity, with its global market estimated at around $4.5 billion.

Meanwhile, Dr Reddy’s shares have declined 12.87% over the past year, underperforming the benchmark’s 7.85% fall. The stock touched its 52-week low of Rs 1,101 on July 23, 2026. The company's market capitalisation stood at Rs 95,453 crore.

What could drive Aurobindo Pharma’s growth?

JM Financial expects Aurobindo Pharma to evolve from a generics-focused company into a broader growth platform, although US generics will remain its core earnings engine.

JM Financial forecasts revenue, EBITDA and profit after tax to grow at compound annual rates of 14%, 20% and 28%, respectively, between FY26 and FY29. The brokerage values the stock at 17 times its estimated September 2028 earnings.

The US business is expected to deliver high-single-digit growth, supported by market-share gains and capacity expansion. Aurobindo’s US market share reached 11.2% in July, while capacity is projected to rise to around 78 billion units by the end of FY27.

Respiratory products and contract manufacturing are expected to drive the next phase of growth. The company is pursuing nine to 10 respiratory and dermatology opportunities, with four launches expected around March 2027. Its combined CDMO revenue could approach $400 million over the next three to four years.

Other catalysts include the PEN-G ramp-up, deeper antibiotic integration, biosimilar launches and the Merck biologics contract.

Aurobindo Pharma shares have rallied 50.62% over the past year, outperforming the benchmark’s 5.90% gain. The stock touched its 52-week high of Rs 1,717 on August 31, 2026. The company's market capitalisation stood at Rs 94,776 crore and a free-float market value of Rs 45,425 crore.

Disclaimer: This article has been written by Somanjali Das, who is not a SEBI-registered Research Analyst or an Investment Adviser. Somanjali Das and his/her ‘relative(s)’ (as defined under Section 2(77) of the Companies Act, 2013) do not hold any financial interest in the companies mentioned in this article as of the date of publication. The views/recommendations mentioned in this article, wherever applicable, are those of the respective SEBI-registered Research Analyst/brokerage and have been reproduced/reported with due attribution. They should not be construed as the views or recommendations of The EconomicTimes Digital or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment. Brokerage disclaimers here