Pharma stocks to watch after Morgan Stanley sees growth opportunities in the sector

Synopsis: Morgan Stanley highlights structural growth in India’s pharma, favoring Mankind and Torrent for chronic therapy focus, earnings recovery, and supportive valuations, with long-term upside from domestic recovery and biologics optionality.

This article outlines Morgan Stanley’s view on structural growth opportunities in India’s pharmaceutical sector, focusing on Mankind Pharma and Torrent Pharma. It covers industry growth drivers, earnings recovery, valuation support, and company-specific rationales, including revenue and EPS growth, chronic therapy portfolios, and long-term investment potential.

Structural Growth Drivers

Growth Drivers in India’s Pharma Market: India’s pharmaceutical market features long-term compounding franchises, with growth driven by chronic therapies, pricing power, and new product launches. Companies with strong portfolios are positioned to benefit from sustained demand and expanding market opportunities.

Earnings Recovery and Investment Case: Earnings recovery, coupled with specialty drug optionality, favors select players like Mankind. Supportive valuations further strengthen the long-term investment case, making well-positioned pharmaceutical companies attractive for sustained wealth creation.

Mankind Pharma 

Mankind Pharma is a leading Indian multinational pharmaceutical company founded in 1995 and recognized as the 4th-largest in India by domestic revenue. Headquartered in Delhi, it specializes in affordable, high-quality pharmaceuticals, consumer healthcare (OTC), and veterinary products, with popular brands like Manforce, Prega News, and Gas-O-Fast. With a market capitalization of Rs 82,807 crore, the shares of this company closed at Rs 2,005.85, down by 1.69 percent from its previous day’s close price. 

Brokerage View: Morgan Stanley initiates coverage with an Overweight rating, assigning a target price of Rs 2,500, implying 24.6 percent upside. Growth is driven by domestic recovery, biologics optionality, and a strong long-term risk-reward profile in Indian pharma.

Revenue and Earnings Growth Drivers: Revenue is expected to grow at around 11 percent CAGR, with adjusted EPS rising approximately 25 percent over FY26 to FY28. Growth is supported by domestic market recovery and the optionality from biologics, positioning the company for steady long-term performance.

Strong Long-Term Risk-Reward Profile: The company is preferred for its strong risk-reward profile within Indian pharma, benefiting from consistent earnings growth, diversified product offerings, and strategic focus on high-margin segments, making it an attractive choice for long-term investors.

Torrent Pharma 

Torrent Pharmaceuticals, the flagship company of the Torrent Group, is a leading Indian pharmaceutical company (turnover >Rs 11,500 cr, FY25) specializing in branded generics. It holds top positions in Cardiovascular, CNS, GI, and Dermatology across 50+ countries. Founded in 1959, the company, headquartered in Ahmedabad, is known for its focus on chronic therapies. With a market capitalization of Rs 1,42,840 crore, the shares of this company closed at Rs 4,220.65, down by 1.07percent from its previous day’s close price.

Strong Market Position and Therapy Portfolio: The company holds roughly 5 percent market share in the Indian Pharma Market and has a robust chronic therapy portfolio, providing stable growth and a solid foundation for long-term revenue and earnings expansion.

Integration Synergies and Limited Near-Term Upside: Cost synergies of Rs 3 bn in FY28 and Rs 4.5 bn in FY29 are expected post-integration. FY27 is seen as a transition year, with limited upside potential following the recent re-rating of the stock.

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