Target prices for Sun Pharma, Lupin, Dr Reddy's, Zydus Life, Cipla: Q2 preview

Brokerage firm Choice Institutional Equities expects a mixed quarter for pharmaceutical companies in Q2 FY26, with domestic operations likely to outperform even as growth in the US moderates.

The brokerage has maintained a ‘Positive’ sector view, forecasting EBITDA margins to remain “broadly stable” as companies focus on improving their product mix.

While the threat of a proposed US tariff on Indian pharma imports looms, the measure is currently on hold. Choice believes that even if implemented, most companies under its coverage will meet their FY26 targets, given their primary exposure to generics.

Large-cap pharma stocks:

Sun Pharma: Choice expects Q2 revenue to rise 9.4 per cent YoY, led by mid-teens growth in domestic formulations, partially offset by slower US and API performance. The stock carries an ‘Add’ rating with a target of Rs 1,825.

Lupin: The brokerage anticipates strong double-digit revenue growth in North America and other developed markets, with margin recovery supported by material cost efficiencies. Lupin has a ‘Buy’ rating and a target of Rs 2,375.

Dr Reddy’s Laboratories: Revenue is projected to grow in the mid-teens YoY, driven by strong performance in Europe. The stock has a ‘Reduce’ rating with a target of Rs 1,270.

Cipla: Revenue is expected to rise 5.4 per cent YoY, aided by growth in Africa and mid-single-digit expansion elsewhere. Margins may see slight moderation due to higher R&D expenses. Cipla carries an ‘Add’ rating with a target of Rs 1,620.

Zydus Lifesciences: Q2 revenue is likely to grow 10.8 per cent YoY, driven by international formulations and India consumer healthcare, offsetting slower US traction. The stock has a ‘Reduce’ rating and a target of Rs 1,000.

Other key picks:

Choice highlighted Senores Pharma and Granules India as “high-conviction investment ideas” for Q2. Granules India is projected to see 23.5 per cent YoY revenue growth, while Senores is expected to post 12.3 per cent sequential revenue growth. Both stocks carry a ‘Buy’ rating, with targets of Rs 960 and Rs 640, respectively.

The brokerage has a lone ‘Sell’ rating on Alkem Labs, citing potential margin pressure from changes in the product mix, with a target of Rs 4,750.

Laurus Labs is expected to see margins “rebound sharply YoY” due to lower material costs, carrying a ‘Buy’ rating with a target of Rs 1,025. Divi’s Labs is projected to deliver 10.1 per cent YoY revenue growth, driven by its synthesis and nutraceuticals segments.