CLSA selects Apollo Hospitals as top pick, says India's pharma set to outpace US growth

Dr Lal Pathlabs also received an upgrade to 'Outperform' from 'Hold,' with a target price of Rs 3,240 up from Rs 3,110, attributed to a continuous improvement in volume growth with stable pricing.

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26 Aug, 2025 12:21

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Global brokerage firm CLSA has released its 2025 outlook for India's healthcare sector, projecting an 8-9 percent growth in the Indian pharmaceutical market, slightly outpacing the anticipated growth in the U.S. market. The brokerage selected Apollo Hospitals, Max Healthcare, and Dr Lal PathLabs as its top picks.

The firm expects mid-single-digit price erosion in generic drugs and heightened competition for key medications, potentially impacting companies like Dr Reddy's Laboratories, Zydus, and Cipla. In light of these challenges, CLSA expresses a preference for companies with substantial exposure to the domestic market and the hospital sector, favouring diagnostics firms over traditional drug manufacturers.

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In its stock-specific recommendations, CLSA has downgraded Dr Reddy's Laboratories to 'Underperform' from 'Hold' with a target price of Rs 1,090, down from Rs 1,140, citing anticipated competition for key drugs.

Conversely, Aurobindo Pharma has been upgraded to 'Outperform'  from 'Hold' with a target price of Rs 1,400, reduced from Rs 1,540.

Dr Lal Pathlabs also received an upgrade to 'Outperform' from 'Hold,' with a target price of Rs 3,240 up from Rs 3,110, attributed to a continuous improvement in volume growth with stable pricing. Despite a 22 percent decline from its previous high in October 2024 due to a cautious outlook on margins for the second half of 2025, CLSA views the near-term margin outlook as transient, expecting improvement as new labs stabilise.

CLSA said that Dr Lal Pathlabs' share price correction is overdone, as it now trades at a discount to its peers, and CLSA believes the company is well-positioned for growth, given its dominant positioning in the northern region and strong expansion plans.

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