Bernstein has initiated coverage on six pharma stocks, as the international brokerage holds a positive view on the Indian healthcare sector due to multiple tailwinds. Bernstein said that the healthcare sector will ride three major waves in the coming years. The first would be the artificial intelligence-led humanity theme 'live longer, look fitter, invest in healthcare' that is driving the innovation play. Secondly, Bernstein believes that incremental innovation in six niches including metabolic peptides, NDAs and more, builds “Rainmakers” for Indian biopharma. Finally, quality culture and agentic Al gains are the strongest catalysts of innovation ecosystem build out, according to Bernstein. It highlighted that valuations in the healthcare sector are attractive, while policy uncertainties are winding down

Zydus Lifesciences

Bernstein named Zydus Lifesciences as its top pick in the healthcare space, with an ‘Outperform’ rating and a target price of Rs 1,457 apiece. This implies an upside potential of more than 40% from the stock’s previous closing price of Rs 1,038.95 apiece on NSE. “Revenue and EBITDA expansion pivots on (a) Innovation basket will add ~$1Bn and 25% EBITDA CAGR over next two-three years (b) Wellness business that forms about 12% of consolidated revenues will grow double digit backed by GLP-1 driven protein demand, and brands,” Bernstein said.

Lupin

Bernstein has an ‘Outperform’ rating for shares of Lupin, with a target price of Rs 2,707 apiece. This implies an upside potential of nearly 19% from the stock’s previous closing price of Rs 2,281.80 apiece on NSE. “Three drivers to earning acceleration (i) ~$100 million additional revenue rate from US from complex injectables and 505 (B)(2) NDAs (ii) Overtakes Cipla to become #1 Indian company in Global respiratory sales by FY28-29, (iii) will likely outgrow domestic biopharma market by 1-3-1.5 X backed by strong chronic demand,” the international brokerage said.

Sun Pharma

Bernstein has an ‘Outperform’ rating for shares of Sun Pharma, with a target price of Rs 2,235 apiece. This implies an upside potential of more than 21% from the stock’s previous closing price of Rs 1844.6 apiece on NSE. The international brokerage said that this “consistent performer” will continue EPS growth. Innovation medicine franchise will grow at 12-15% to cross $2 billion annual global sales by FY29, and Organon acquisition at $11.75 billion price tag adds about $1.5-2 billion in Synergies over next two-three years, it said. “Domestic biopharma market leadership continues through FY27-29," the international brokerage added.

Aurobindo Pharma

Bernstein has a ‘Market-Perform’ rating for shares of Aurobindo Pharma, with a target price of Rs 1,498 apiece. This implies an upside potential of more than 2% from the stock’s previous closing price of Rs 1,463.5 apiece on NSE. “Balance of forces generate flat earnings growth as (i) China+1 based strategic API investments (Pen-G, 6-APA) as well as recent approved NDAs materialize in FY27-28 adding ~₹100Bn in sales but (ii) Total Biosimilar investments ~$500 Mn will gestate post FY29 and at single digit NPV given second wave Biosimilars (iii) US revenue basket continues flat for FY27 despite Lannett acquisition, thereby offsetting EMEU growth,” the international brokerage said.

Mankind Pharma

Bernstein has an ‘Underperform’ rating for shares of Mankind Pharma, with a target price of Rs 2,057 apiece. This implies a downside potential of more than 17% from the stock’s previous closing price of Rs 2,479.40 apiece on NSE. “Core sales growth deceleration deeper than street's expectation as we estimate BSV growth in high-single digit against planned high-teens for FY27, drags overall EPS growth rate to near-zero, near zero free cash flow till FY28 due to acquisition debt limits licensing opportunities and increased R&D allocation by ~$100 Mn in orthogonal new drug pursuits that distracts management focus on core sales growth and thereby underperformance to domestic biopharma market till FY29,” the international brokerage said.

Biocon

Bernstein has an ‘Underperform’ rating for shares of Biocon, with a target price of Rs 326 apiece. This implies a downside potential of nearly 24% from the stock’s previous closing price of Rs 432.70 apiece on NSE. “Weak sales execution drags ROCE as (i) despite strong approved Biosimilars (Ustekinumab, Denosumab, Trastuzumab) average sales/ Biosimilar is just 100-150 Mn which is lower than half of global peers like Sandoz, Teva (ii) Exposure to $800 Mn US dollar-debt and interest coverage to strain balance sheet in FY27 (iii) we estimate Syngene's bio-CDMO pipeline will be majority dry in FY27 while inventory write-off of ~$50Mn from Zoetis contract drags growth to mid-single digit for next 24-30 months,” the international brokerage said.