Pharma is back on the growth track with robust revenue, higher profitability & cost optimization. Top 3 Pharma stocks to buy by Axis Securities

In Q1FY25, the Pharma Coverage universe posted robust revenue growth of 11%/4% YoY/QoQ, driven by a strong domestic market, new launches (especially Darunavir, DDR D, gMyrbetriq, and gSpiriva), lower price erosion, gross margin expansion through cost optimization, and growth in the US base business portfolio. EBITDA margin improved by a healthy ~250bps/120bps YoY/QoQ amidst normalizing cost inflation and stabilizing prices.

Pharma

Pharma Back on Growth Track

▪ High single-digit domestic growth is expected in FY25E. Growth in the US market is projected to remain robust, driven by price normalization in the base business, continued ramp-up of gRevlimid, and new product launches, including Darunavir, gMyrbetriq, DRR D, and gSpiriva.

▪ In the US business, supply constraints have led to a significant reduction in price erosion, which is anticipated to stay low for the rest of FY25E.

▪ In India, growth has primarily been fueled by price increases and strong performance in chronic therapies, with most major companies forecasting high single-digit growth for FY25E.

▪ Margins are expected to improve as raw material and freight costs stabilize, US price erosion moderates, and a better product mix is achieved.

However, USFDA inspections remain a risk factor, and price erosion in the US could accelerate once supply constraints ease.

▪ Given these dynamics, the focus remains on companies launching niche products in the US market and those with a strong chronic portfolio in the Indian market.

▪ Top Sector Ideas : LUPIN, KIMS, and Aurobindo are the preferred selections within the Pharma sector.