Morgan Stanley has initiated coverage on India’s four largest pharmaceutical companies by market capitalization — Sun Pharma, Lupin, Dr. Reddy’s Labs (DRL), and Cipla — with a broadly cautious outlook. Among them, only Sun Pharma has been rated ‘Overweight’, while the others are rated Equal-weight or Underweight due to sectoral headwinds and moderating earnings growth.
The brokerage expects earnings growth for these large-cap pharma players to taper over FY25–27. However, strong balance sheets across the board should allow continued investment in high-potential areas such as peptides, specialty drugs, and biosimilars.
Sun Pharma stands out for Morgan Stanley due to its chronic-heavy India business, strong U.S. specialty portfolio, and healthy balance sheet. The brokerage has set a target price of ₹1,960 on the stock and sees continued traction in branded products like Ilumya, Cequa, and Winlevi in the U.S. market as key drivers of profitability.
Lupin has been rated Equal-weight with a target price of ₹2,096. Morgan Stanley expects a strong first half in FY26, helped by generic launches. However, it flagged potential U.S. pricing pressures as a risk in the second half, especially on key products that have limited exclusivity.
Dr. Reddy’s has also been rated Equal-weight, with a target price of ₹1,298. The firm is expected to face a revenue tapering from generic Revlimid, a high-margin product, in FY26. However, Morgan Stanley sees a potential upside surprise from semaglutide (a diabetes and weight-loss drug) if ramp-up occurs faster than expected.
Cipla has received the most cautious outlook, rated Underweight with a target price of ₹1,400. Morgan Stanley forecasts a -2% EPS CAGR over FY25–27, citing base pressure from gRevlimid and fewer high-margin pipeline products coming through.
“FY26 is shaping up to be a transition year for India pharma majors. Portfolio mix shifts, patent cliffs, and competition risks will differentiate performance — and investors will need to be selective,” Morgan Stanley said.
The brokerage emphasized that structural trends remain positive for India pharma in the long term, particularly with increasing investments in complex generics and biologics, but near-term earnings momentum may soften.
