CLSA bullish on Sun Pharma, Cipla, Cadila Health and Aurobindo

Mumbai: Earnings momentum for Indian drug makers will continue led by a gradually improving outlook for the US, strong longterm macro drivers for India, margin expansion from improved product mix and a currency tailwind, said foreign brokerage CLSA in a note.

However, following a broad-based rally in the sector stocks, the brokerage prefers a stock-specific approach. CLSA said Sun Pharmaceutical, Cipla, Aurobindo Pharma and Cadila Healthcare are its top sector picks.

“Current trends in the US indicate an improving outlook for the generic industry with stable QoQ (quarter-on-quarter) price erosion in the base business in the range of the low-to-mid single digits. The recent spurt in approvals in the US for Indian companies gives us confidence of improvement in growth visibility for the US in FY21,” said CLSA.


Nifty Pharma is up 12.4 per cent since February while Nifty is down 23.1 per cent during the same period.

CLSA has downgraded Lupin to sell from outperform as risk-reward has turned unfavourable.

It has also lowered rating on Abbott India to outperform from buy due to valuation discomfort. However, it has raised target price on Lupin and Abbott India by 18.2 per cent and 20.6 per cent, respectively.