JPMorgan has identified four pharmaceutical and contract research, development and manufacturing organization (CRDMO) stocks as its preferred picks, with Torrent Pharma offering the highest potential upside at nearly 25%. The brokerage's 'Overweight' list includes Torrent Pharma with a target price of ₹5,950 (24.7% upside), Cipla at ₹1,600 (19.5% upside), Divi's Laboratories at ₹9,100 (4.7% downside at current levels), and Anthem Biosciences at ₹900 (1.1% upside). According to The Financial Express, these selections reflect JP Morgan's selective approach to the pharmaceutical sector, with the distinction important as the brokerage also maintains 'Neutral' ratings for Zydus Lifesciences and 'Underweight' for Dr Reddy's Laboratories.
Torrent Pharma leads JP Morgan's pharmaceutical picks with an 'Overweight' rating and target price of ₹5,950, offering 24.7% upside potential. The investment case centers on the integration of JB Pharma, which adds scale to Torrent's India business and strengthens exposure to chronic therapies. As reported by The Financial Express, JP Morgan expects Torrent's earnings before interest, taxes, depreciation and amortisation and adjusted profit after tax to grow sharply in the September quarter, helped by the acquisition and improving operating performance. The brokerage projects India to gain from US operations with 16% YoY growth from JB Pharma acquisition, while the US franchise is expected to see marginal decline YoY due to pressure in generics but increase 12% QoQ to $480 million owing to ramp-up in Leqembi, Lunivect and broader strength in specialty products. The integration of JB Pharma is central to the story because it adds scale to Torrent's India business and strengthens its exposure to chronic therapies, with the acquired business expected to outperform in this segment while Torrent's US operations should benefit from specialty products and new launches.
Cipla carries an 'Overweight' rating with a target price of ₹1,600, implying 19.5% upside potential. The brokerage expects revenue, earnings before interest, taxes, depreciation and amortisation and adjusted profit after tax to grow in the September quarter, supported by the India business and continued strength in respiratory products in the US. According to The Financial Express, the domestic franchise is particularly important to near-term earnings outlook, with JP Morgan expecting strong growth in respiratory, cardio-diabetes and pain therapies. The US business is expected to benefit from its respiratory portfolio and new products, with the company having several product-related catalysts including gVentolin and gAdvaair ramp-up, Symbicort and other peptide approvals/launches, and Indore plant classification. JP Morgan expects US to see large base growth of 7% YoY, with US respiratory and new products expected to remain strong, while India is expected to grow 12% YoY with strong growth in 2Q in India respiratory, cardio-diabetes and pain for Cipla.
Divi's Laboratories is JP Morgan's preferred CRDMO name with an 'Overweight' rating and target price of ₹9,100, though at current levels the stock trades 4.7% above the brokerage's target, implying 4.7% downside. The near-term earnings picture remains supported by custom synthesis and manufacturing business, with JP Morgan expecting generic and contract manufacturing business to see slow growth of 6% YoY due to continued pricing pressure in generics while custom synthesis remains attractive. Anthem Biosciences is JP Morgan's other preferred CRDMO stock with an 'Overweight' rating and target price of ₹900, offering 1.1% upside but with much higher growth profile than established pharmaceutical names. The brokerage expects strong revenue and earnings before interest, taxes, depreciation and amortisation growth as project execution improves and delayed deliveries return to normal, with Anthem expected to deliver revenue and earnings before interest, taxes, depreciation and amortisation growth of 19% for the full year, broadly in line with management guidance. The key attraction is the company's ability to convert a growing project pipeline into commercial revenue, as project execution improves, operating leverage could become increasingly important for earnings.
