Indian pharma stocks rallied up to 4%, led by Divi’s Labs, Lupin, Cipla, Aurobindo Pharma and Sun Pharma, after HDFC Securities highlighted improving long-term prospects for the sector, especially in the CRDMO (Contract Research, Development and Manufacturing Organisation) space.
Key Reasons Behind the Rally
1. India’s Growing Share in Global CRDMO
- India’s share in the global CRDMO market is expected to rise from 3.8% in 2024 to 4.7% by 2029
- This implies steady volume growth and higher export opportunities for Indian pharma companies
2. China+1 Shift Benefiting India
- Global pharma companies are diversifying supply chains away from China
- Indian players are gaining from:
- Cost competitiveness
- Regulatory credibility
- Strong chemistry and manufacturing skills
3. Margin Expansion Ahead
- Falling input costs
- Normalisation of freight and energy prices
- Better capacity utilisation at CRDMO facilities
HDFC Securities expects operating margins to improve over the next 2–3 years.
4. US Pricing Pressure Easing
- Price erosion in the US generics market appears to be bottoming out
- New product launches and complex generics should support revenue growth
Stock-Specific Triggers
- Divi’s Labs: Strong CRDMO pipeline, recovery in custom synthesis demand
- Lupin: Improving US portfolio, respiratory and specialty products
- Large-cap pharma: Defensive earnings + export-led growth appeal
Why the Sector Looks Attractive Now
- Reasonable valuations compared to historical averages
- Stable cash flows and low leverage
- Defensive play amid global geopolitical and market volatility
Bottom Line
HDFC Securities believes pharma offers a rare combination of visibility, growth and defensiveness, making it attractive for medium- to long-term investors, especially as India strengthens its position in the global pharmaceutical supply chain.
If you want, I can also break down top pharma stocks to watch, CRDMO leaders, or risks to the sector going forward.
