India’s healthcare sector delivered a subdued performance in Q2 FY26, with most companies struggling in the US generics market and domestic growth dampened by a weak anti-infective season. According to Systematix Research, seven companies saw earnings estimate cuts, while Lupin was the only name to receive an upward revision.
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Systematix Report
Q2 FY26 earnings of stocks within our coverage were broadly in line with estimates. US generics underperformed for most companies, except Lupin and Zydus Lifesciences.
Domestic growth too was subdued owing to a weak antiinfective season. Robust volume growth / new launches led to Sun Pharma and Ajanta Pharma outperforming peers on domestic growth.
We have cut estimates for seven companies within our coverage and raised the same only for Lupin.
Companies that meaningfully outperformed consensus expectations include Lupin, Sun Pharma, Zydus Lifesciences and Divi's Labs.
Sun Pharma’s outperformance was driven by strong growth in its branded portfolio business. Higher contribution from custom synthesis aided Divi's performance. Steep growth in US generics (led by gTolvaptan) aided Lupin and Zydus Lifesciences’ performances.
Orchid Pharma was the key laggard, with its gross margin plummeting nearly 1,000bps QoQ due to the deterioration in its antibiotic API pricing. Pricing reversal, Licensing deals for its novel antibiotic Enmetazobactam and royalties from EU enmetazobactam sales are the key triggers for the stock going forward.
Pfizer revenue growth rebounded well during the quarter and we remain optimistic around the sustenance of growth run rate as they have multiple new product launch / ramp up expected during the year (Prevenar 20, avibactam + Aztreonam, Rimegepant).
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