Brokerage firm UBS has reined in on the Indian pharma sector, cutting the target price for some of the most active players, including Lupin, Cipla and even Zydus Lifesciences, while retaining a 'buy' call on only one stock.
In its latest note, UBS has cut the target price on all pharma stocks under its radar. But Sun Pharma has emerged as the only pharma player which still has a buy call from the brokerage firm, even though it has cut the target price on India's largest pharma company.
UBS believes Sun Pharma is well-positioned in the Indian market, with the company's recent semaglutide injection launch being a key growth catalyst.
A shift in sales mix is likely to drive growth and margin expansion for the company, as well as a rising speciality mix. Keeping these things in mind, the brokerage has maintained a 'buy' call on Sun Pharma while cutting the target price from Rs 2,450 to Rs 2,200.
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UBS has also hiked the target price on Aurobindo Pharma, even issuing a double-upgrade. The brokerage firm, citing balanced risk-reward and diversification, has hiked the stock's target price from Rs 1,200 to Rs 1,400 while upgrading its outlook from 'sell' to 'neutral'.
However, the brokerage firm is not so constructive on other pharma players. For Zydus Life, they have maintained a 'sell' call, cutting the target price from Rs 850 to Rs 800.
UBS believes Zydus Life could face earnings volatility risk while a meaningful one-off opportunity exclusive agreement ends in Sept. 2027. Domestic business, though, looks well placed with a focus on generic semaglutide.
Meanwhile, for Cipla, UBS has downgraded its outlook from 'buy' to 'neutral' while reducing the target price from Rs 1,750 to Rs 1,400.
While growth drivers remain intact for Cipla, UBS believes the company could face supply headwinds and that there is a lack of catalysts in the near term. The firm expects the healthy product pipeline to drive medium-term growth.
Finally, UBS has cut the target price on Lupin from Rs 2,050 to Rs 1,800 while maintaining a 'sell' call, citing peak US sales may taper off in the next two years, while there is also a high concentration risk. Lupin's domestic business remains healthy, with a strong balance sheet.
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