The brokerage has assigned “Outperform” ratings to Zydus Lifesciences, Lupin, and Sun Pharmaceutical Industries, while initiating coverage on Aurobindo Pharma with a “Market Perform” rating. It has a contrarian “Underperform” view on Mankind Pharma and Biocon.
Among its preferred names, Zydus Lifesciences emerged as Bernstein’s top pick, with a price target of ₹1,457, implying a 34% upside from Monday’s closing price of ₹1,087.6.
The brokerage also assigned an “Outperform” rating to Lupin and Sun Pharma, with targets of ₹2,707 and ₹2,235, implying potential upsides of 20% and 25%, respectively, from their closing price on Monday.
Bernstein initiated coverage on Aurobindo Pharma with a Market Perform rating and a target price of ₹1,498, indicating a modest 3% upside from Monday’s close of ₹1,451.8.
It maintained a contrarian Underperform stance on Mankind Pharma and Biocon, assigning target prices of ₹2,057 and ₹326, respectively. The target price for Mankind implies a potential 13% downside from Monday’s closing price of ₹2,357.4.
Bernstein On Indian Pharma
According to Bernstein, valuations across the Indian biopharma sector have re-rated significantly, with the Nifty Pharma index trading slightly above its 10-year average multiple of 30.5 times its one-year forward earnings. However, it noted that its preferred stocks continue to trade below their long-term average valuations.
The brokerage said the market is largely pricing in domestic market growth and pricing pressure in the US generics business, while underestimating the earnings potential from specialty products, innovation-led launches, and growth in emerging markets.
Bernstein expects innovation in niche therapies and complex specialty medicines to drive a meaningful acceleration in revenue growth for Indian drugmakers, resulting in a sustained expansion in earnings over the coming decade.
The brokerage identified three major structural trends that could support the sector’s growth: rising global spending on healthcare and wellness, expanding healthcare infrastructure in emerging economies, and increasing adoption of next-generation therapies.
It estimates that new treatment modalities could add nearly 100 million patients globally every year, creating an incremental market opportunity of around $400 billion.
Bernstein believes six innovation areas will emerge as key “rainmakers” for Indian pharmaceutical companies. The include:
- 505(b)(2) drug applications
- orphan drugs
- drug-device combinations
- drug repurposing in niche therapies
- metabolic peptides
- and RNA and cell-based therapies such as CAR-T.
These opportunities could add $70 billion to $75 billion to the industry’s size over the next decade, helping the Indian biopharma market expand fourfold to nearly $195 billion, according to the brokerage.
Zydus Lifesciences, Lupin and Sun Pharma are expected to be among the biggest beneficiaries of this shift, Bernstein said.
The brokerage also expects Indian pharmaceutical companies to build the world’s largest network of future-ready manufacturing facilities over the next decade.
It added that the adoption of generative AI across research and development and operations could drive nearly 70% of the sector’s AI-led profitability gains, with Zydus and Lupin best positioned to benefit.
