Axis Sec sees upside in pharma, hospitals; Lupin, Aurobindo among top bets

Axis Securities has named Lupin, Aurobindo Pharma, Max, and Fortis as top picks, citing strong fundamentals, resilient growth drivers, and robust operational execution

Analysts at Axis Securities remain bullish on the pharma and hospital sectors, naming Lupin, Aurobindo Pharma, Max Healthcare Institute, and Fortis Healthcare as their top picks. The brokerage cited these companies’ strong fundamentals, resilient growth drivers, and robust operational execution as creating attractive opportunities for medium- to long-term investors. 

In its report, “Top Conviction Ideas – Pharma & Hospitals”, Axis Securities said that Q3FY26 results underscore robust domestic pharma growth and strong operational momentum in healthcare, pointing to attractive investment opportunities over the medium- to long-term horizon. 

The pharmaceutical sector recorded 12.3 per cent year-on-year (Y-o-Y) growth, driven by India (+12 per cent Y-o-Y), while US revenues were slightly muted due to lower Revlimid sales. Chronic therapies drove India’s IPM (+12 per cent Y-o-Y), with GLP-1 therapies such as Tirzepatide and Semaglutide maintaining strong momentum. Companies like Lupin and Dr Reddy’s Laboratories delivered healthy performance, offsetting pressures in the US generics market. 

 

The healthcare segment posted 15 per cent Y-o-Y revenue growth, although margins were temporarily under pressure due to new bed additions and ramp-ups. Occupancy stood at 61 per cent, with average revenue per occupied bed (ARPOB) at Rs 62,000. Ebitda margins were 22.9 per cent, reflecting operating leverage from mature assets partly offset by new facilities. Operational bed days rose 13 per cent Y-o-Y, supported by a higher surgical mix and improved insurance penetration.

Strong structural growth ahead

Axis Securities expects strong structural growth across both sectors. “For pharma, companies with robust domestic chronic portfolios, biosimilars, and peptide pipelines are poised to outperform the broader IPM. Lupin and Aurobindo Pharma are particularly well-positioned with strong US product performance, successful launches, and market-leading operations in India,” said the brokerage. 

On healthcare, Axis Securities noted structural growth driven by rising insurance penetration, higher surgical volumes, and favorable ARPOB trends. “Temporary margin pressures from new beds are expected to ease, while mature hospitals like Max Healthcare and Fortis are already delivering strong operational leverage.”

Key monitorables

For pharma, the brokerage flagged price erosion trends, margin expansion, uptake of new product launches—particularly GLP-1 and peptides—and US generics portfolio performance. 

For hospitals, key monitorables include occupancy improvement, operational bed utilization, rising insurance penetration, favorable payer mix, and ramp-up of new hospital projects.

Top conviction ideas

Lupin – Buy | Target Price: ₹2,460

Axis Securities recommended Buy on Lupin stock, with a target of ₹2,460, citing a stronger launch cycle with multiple complex products expected to drive the next phase of growth.

 

“The near-term trigger is the US launch of Pegfilgrastim (expected before Q4FY26), marking entry into US biosimilars. Recent complex launches such as gRisperdal Consta (from the Nanomi long-acting platform) continue to scale, reinforcing its shift toward high-barrier injectables,” said the brokerage.

 

Over the next three years, the injectables and 505(b)(2) portfolio is expected to exceed $100 million in annual revenues, supported by a growing institutional business. In respiratory, progression of gDulera and planned advancement of Mepolizumab add further optionality.

 

“Over the long term, the biosimilars roadmap led by bRanibizumab (FY27), followed by bAflibercept and bEtanercept (FY29–30), provides sustained pipeline visibility and margin-accretive growth,” said Axis Securities.

Aurobindo Pharma – Buy | Target Price: ₹1,345

The brokerage recommended Buy on Aurobindo Pharma stock, with a target of ₹1,345, citing a transition from high-intensity capex to operational monetization across its global footprint.

 

Management aims for an internal Ebitda margin of 20–21 per cent for FY26, supported by strong operating leverage and a diversified business model.

 

In the US, the Dayton facility has entered the commercial phase, with meaningful revenue contributions expected from FY27. The pending Lannett acquisition, targeted for Q1FY27, is expected to strengthen the base business.

 

Europe remains a key growth driver, projected to exceed $1 billion in annual revenue by FY26-end. Ramp-up at the Pen-G facility to 10,000 MT annualised, the China OSD plant nearing Ebitda breakeven in Q4FY26, and a poised biosimilars business for CY29 are expected to enhance profitability and growth.

Max Healthcare Institute – Buy | Target Price: ₹1,250

Axis Securities recommended Buy on Max Healthcare stock with a target of ₹1,250, citing 6–7 per cent ARPOB growth in mature hospitals and a sustained network occupancy target of 80 per cent.

 

The expansion plan is on track to add 1,500 beds in FY26, including the 160-bed addition at Max Mohali and phased commissioning at Nanavati Max (Mumbai) and Max Smart (Saket).

 

The recent CGHS rate revision is expected to provide a revenue uplift of Rs 200 crore, with 85–90 per cent flowing to Ebitda. Benefits from the “superspeciality hospital” category, offering 15 per cent higher tariffs, are expected from FY27 onwards. Focus on high-margin oncology services and international patient volumes should support margin normalization and earnings compounding over the medium term.

Fortis Healthcare – Buy | Target Price: ₹1,070

Axis Securities assigned a Buy rating to Fortis Healthcare stock with a target of ₹1,070. Management projects sustained growth through aggressive brownfield expansion and optimised clinical operations.

 

According to the brokerage, the hospital segment is expected to maintain mid-to-high teens revenue growth, targeting a consolidated Ebitda margin of 24–25 per cent over the next two years (up from 22.3 per cent). A capacity roadmap includes adding over 3,200 beds by 2030, with 430 beds operational in FY27, including a 200-bed new block at the FMRI flagship hospital.

 

Occupancy is expected to rise from 67 per cent to 70–75 per cent within a year, supported by ramp-ups at Adayu and People Tree Hospital, while ARPOB is projected to grow 4–5 per cent annually through an improved specialty mix and higher-complexity quaternary care.

  ====================================== 

(Disclaimer: The views and investment tips expressed by the analysts in this article are their own and not those of the website or its management. Business Standard advises users to check with certified experts before taking any investment decisions.)