Sun Pharma, Lupin, Biocon, Mankind, Aurobindo shares: What Bernstein says

Foreign brokerage Bernstein has initiated coverage on India Healthcare sector with a positive sector view, saying the innovation opportunities in niche therapies and complex specialty would drive Indian Biopharma's revenue acceleration and lead to significant sustainable scale up in earnings. The foreign brokerage initiated coverage on six stocks. It suggested 'Outperform' rating on Sun Pharma, Lupin and Zydus Lifesciences Ltd, with Zydus as its top pick. 

Bernstein said Biocon Ltd and Mankind Ltd are its non-consensus 'Underperform' stock ideas. It called Aurobindo Pharma as 'Market-Perform'. It called valuations attractive for India pharma, saying the policy uncertainties are winding down. 

"Indian Biopharma (Pharma Nifty) multiples have accelerated to reach slightly above their ten-year average of 30.5 times. Our Outperforms are trading well below their ten-year average. We believe the market is pricing in domestic market growth and price headwinds in vanilla generics in US market, but not the rainmakers and Emerging Markets growth," Bernstein said.

It said Indian biopharma quality is on a transformation path and will anchor exports of the innovation medicines. 

"Our propietary model suggests that over the next decade Indian biopharma will have the largest network of future-ready plants globally. Indian Biopharma's Gen Al adoption pivots to innovation efficiency, and we estimate over the next decade about three to four P.P. addition to profit margins from enterprise wide implementation of Al use cases. We expect R&D and operations to drive 70 per cent of this Al-led profitability unlock. Key beneficiaries: Zydus, Lupin," it said.

Bernstein said incremental innovation in six niches will produce Rainmakers for Indian biopharma. "These six areas include 505(B)(2) NDAs, Orphan indications, Drug-device combinations, drug Repurposing in niche therapies, Metabolic peptides, and RNA and cellular therapies
such as CAR-T. We expect over the next decade these rainmakers to add $70-75 billion to industry size and total Industry to grow by 4X to $195Bn. Key beneficiaries: Zydus, Lupin," it said.

Bernstein said the pharma sector will ride three major waves in the coming years - It sees Al-led innovation play. Access will be key to this theme as global workforce upgrades to next generation medicines, obesity control, mental wellbeing, nutraceuticals and preventive medicine, personal hygiene, and digital healthcare, it said.

"Increasing penetration of health infrastructure in emerging economies, exponential rise in disposable income from Al leverage, and lifestyle shift towards spending for image consciousness
will drive this adoption. Globally, we estimate these new modalities will incrementally add 100 million patients each year, forming about $400Bn opportunity pie from incremental innovations," Bernstein said.