Top 5 Pharma Stocks in India by Growth

The Indian pharmaceutical industry has undergone a remarkable transformation from its nascent stages to being the pharmacy of the world.

Today, India caters to 60% of the world's demand for vaccines, 40% of the generic demand in the US, and 25% of the medicines in the UK.

India's cost competitiveness has given it the power to manufacture and sell medicines at a competitive rate.

The government's boost to the sector, growing population, increasing awareness of health, and an ageing population across the globe, are also the driving factors that could take the industry to a value of US$ 130 billion (bn) by 2030 from US$ 40 bn in 2021.

In this high-growth industry, several Indian players have made their mark in the world.

With their innovation and resilience, these companies have achieved remarkable success. In this editorial, we will have a look at five such companies, which have seen above-average growth in the recent past.

#1 Lupin

First on the list is Lupin.

Lupin has demonstrated solid financial performance with a 16% YoY revenue growth, reaching Rs 55.1 bn.

The company's US sales surged by 25% YoY to 19 bn, primarily driven by new product launches. Its India business outpaced the market with an 18% YoY growth, far exceeding the Indian pharmaceutical market (IPM) growth rate of 8.7%.

Additionally, Lupin saw strong double-digit growth in developed markets like Canada and the UK, driven by its expanding portfolio.

On the profitability front, Lupin's bottom line grew by an impressive 79% YoY, reaching Rs 8.1 bn.

Going forward, Lupin has a healthy pipeline of around 20 new product launches planned for FY25, aiming for 20-30% growth.

Lupin Financial Snapshot (2020-24)

	FY20	FY21	FY22	FY23	FY24
Revenue Growth (%)	5%	-1%	8%	1%	20%
Gross Profit Margin (%)	65%	65%	60%	59%	67%
Operating Profit Margin (%)	15%	17%	1%	10%	19%
Net Profit Margin (%)	NM	8%	-9%	3%	10%
Return on Capital Employed (%)	9%	9%	-7%	6%	16%
Return on Equity (%)	NM	9%	-13%	4%	14%

Data Source: Screener.in

Coming to its operations, Lupin develops, manufactures, and sells a wide range of branded and generic formulations, APIs, and biotechnology products.

It has a comprehensive product portfolio, which it manufactures in its 15 manufacturing facilities across the world.

The company also has 6 state-of-the-art API facilities, and 7 R&D facilities.

Lupin's products are spread across various therapeutic areas including cardiovascular, diabetology, asthma, pediatrics, and central nervous system.

For more information, you can look at Lupin's factsheet and quarterly results.

#2 Aurobindo Pharma

Second on the list is Aurobindo Pharma.

Aurobindo Pharma reported a topline growth of 10% YoY, reaching Rs 75.7 bn.

US revenues stood at Rs 35.2 bn, reflecting the impact of seasonality, while European revenues reached Rs 19.1 bn, keeping the company on track for over Rs 76.5 bn in FY25.

The operating margin was maintained at 21.4%, supported by stable raw material prices and operating leverage. Aurobindo's net profit for the quarter saw a massive increase by 61% YoY to Rs 9.2 bn.

Aurobindo Pharma Financial Snapshot (2020-24)

	FY20	FY21	FY22	FY23	FY24
Revenue Growth (%)	18%	7%	-5%	6%	17%
Gross Profit Margin (%)	58%	60%	57%	55%	57%
Operating Profit Margin (%)	21%	21%	19%	15%	20%
Net Profit Margin (%)	12%	22%	11%	8%	11%
Return on Capital Employed (%)	19%	18%	13%	9%	14%
Return on Equity (%)	19%	18%	13%	9%	14%

Data Source: Screener.in

Coming to its operations, Aurobindo Pharma was founded in 1986. It's a market leader in single-unit manufacturing of semi-synthetic penicillin (SSP).

The company has a presence in several segments such as cardiovascular, neurosciences, anti-retroviral, anti-diabetes, and gastroenterology.

The company's injectable sales accounts for 25% of US sales and 12% of its overall sales. The company supplies 15 drugs across 22 categories which are in shortage in the US.

Aurobindo Pharma recently entered into a joint venture (JV) with MSD Pharmaceuticals based in New Jersey for biologics manufacturing. An investment amounting to Rs 10 bn will build a manufacturing facility in Telangana through Aurobindo's biologics arm, TheraNym. This announcement led to the rise in the share price by 4%.

The growth prospects of Aurobindo Pharma focus on garnering US generics business through its strong manufacturing value chain.

For more information, you can look at the financial factsheet and results of Aurobindo Pharma.

#3 Sun Pharma

The third company in the list is Sun Pharma.

Sun Pharma's sales for Q1 FY25 reached Rs 125.2 bn, reflecting a 6.3% YoY increase and a 6% sequential increase from Q4 FY24.

Formulation sales in India totaled Rs 41.4 bn, a robust growth of 16.4 % YoY. India formulation sales constituted 33.1% of total consolidated sales for the quarter.

Overall sales in the US business declined slightly by 1% YoY to Rs 37.4 bn, accounting for 31.1% of consolidated sales.

Branded formulation revenues in emerging markets were Rs 23.8 bn, up 8.8% YoY, with constant currency growth of 11%. Sales in the rest of the world were US$ 190m, down 2.9% YoY.

Net profit surged 40.2% YoY to Rs 28.4 bn, with an adjusted increase of 20.9% after excluding prior quarter adjustments.

Sun Pharma Financial Snapshot (2020-24)

	FY20	FY21	FY22	FY23	FY24
Revenue Growth (%)	13%	2%	15%	14%	11%
Gross Profit Margin (%)	72%	74%	73%	76%	78%
Operating Profit Margin (%)	21%	25%	27%	27%	27%
Net Profit Margin (%)	13%	7%	9%	19%	20%
Return on Capital Employed (%)	10%	13%	17%	16%	17%
Return on Equity (%)	9%	5%	7%	15%	15%

Data Source: Screener.in

Coming to its operations, Sun Pharma is the largest pharma company in India. It is engaged in manufacturing, developing, and marketing a wide range of branded and generic formulations and active pharmaceutical ingredients (API).

The company has a wide product portfolio, including generics, branded generics, and speciality products.

It offers medicines in all forms of dosage, including injectables, sprays, ointments, tablets, capsules, and liquids across various therapeutic areas such as cardiology, neuropsychiatry, gastroenterology, dermatology, ophthalmology, and onco-dermatology.

Sun Pharma has around 43 manufacturing facilities across India, America, Asia, Africa, Australia, and Europe.

It also has six major state-of-the-art research and development (R&D) labs in India, Israel, Canada, and the USA, with capabilities across generics, finished dosage development, biological support, and new drug development.

Sun Pharma has a strong domestic and international presence, making it one of the largest pharmaceutical companies in the country.

For more information, you can have a look at the financial factsheet and results of Sun Pharma.

#4 Zydus Lifesciences

Fourth in the list is Zydus Lifesciences.

Zydus Lifesciences' consolidated revenues for Q1 FY25 stood at Rs 62.1 bn, reflecting a 21% YoY growth and a 12% QoQ growth.

Operating profit for the quarter was Rs 20.8 bn, marking a 38% YoY increase and a 28% QoQ increase. The operating margin improved to 33.6%.

Net profit reached Rs 14.2 bn, up 31% YoY. The company successfully deleveraged its balance sheet by repaying all debt during the quarter.

Zydus Lifesciences anticipates healthy double-digit growth for its US business in FY25, with expectations of around 25+ product launches throughout the year. Despite ongoing FDA compliance challenges, management remains optimistic about the prospects in the US market.

Zydus Lifesciences Financial Snapshot (2020-24)

	FY20	FY21	FY22	FY23	FY24
Revenue Growth (%)	8%	1%	5%	14%	13%
Gross Profit Margin (%)	65%	67%	63%	63%	68%
Operating Profit Margin (%)	20%	24%	22%	22%	28%
Net Profit Margin (%)	8%	15%	31%	12%	20%
Return on Capital Employed (%)	11%	14%	13%	15%	22%
Return on Equity (%)	12%	17%	27%	12%	20%

Data Source: Screener.in

Coming to its operations, Zydus Lifesciences, formerly known as Cadila Healthcare, is an Indian multinational pharma company headquartered in Ahmedabad, which is primarily engaged in the manufacture of generic drugs.

It has a presence across the pharmaceutical value chain including innovating (research & development), manufacturing, marketing, and selling of finished dosage human formulations, active pharmaceutical ingredients (APIs), animal healthcare products, and consumer wellness products.

The company has manufacturing facilities at Ahmedabad, Ankleshwar, and Vadodara in Gujarat, Ponda in Goa, Raigad in Maharashtra, and Solan in Himachal Pradesh.

For more information, you can have a look at the financial factsheet and results of Zydus Lifesciences.

#5 Cipla

Fifth on the list is Cipla.

The quarterly revenue for Cipla in Q1 FY25 stood at Rs 66.9 bn, reflecting a growth of 7%.

The operating profit increased 14% YoY. The operating margins for the quarter improved to 25.6%.

The net profit of the quarter has seen an increase of 17.2% YoY to Rs 16.1 bn.

Going forward, Cipla is looking to expand its MR base in India to around 10,000 people and is exploring strategic opportunities in India for both small and large acquisitions.

The company is considering investments in sterile injectable facilities and specialty 505 (b) (2) assets in the US, with a focus on innovation and potential acquisitions in India's branded generic space.

Cipla Financial Snapshot (2020-24)

	FY20	FY21	FY22	FY23	FY24
Revenue Growth (%)	5%	12%	14%	5%	13%
Gross Profit Margin (%)	65%	62%	61%	64%	66%
Operating Profit Margin (%)	19%	22%	21%	22%	24%
Net Profit Margin (%)	9%	12%	12%	12%	16%
Return on Capital Employed (%)	12%	17%	17%	18%	23%
Return on Equity (%)	10%	13%	12%	12%	16%

Data Source: Screener.in

Cipla is the third-largest pharmaceutical company in India. It has a diversified product portfolio of over 1,500 products across 65 therapeutic areas. It also has market leadership in various product categories.

Some of the most popular brands of the company are Nicotex, Cofsils, and ORS. It has 47 state-of-the-art manufacturing facilities where it manufactures generics and APIs.

The company also has five R&D facilities across India and the USA, with a team of over 1,600 scientists.

It has a strong domestic presence with a wide distribution network covering retailers, grocers, modern trade, and e-commerce.

For more information, you can have a look at the financial factsheet and results of Zydus Lifesciences.

Conclusion

While the Indian pharmaceutical industry shows significant growth potential, it's crucial to be aware of potential challenges.

Regulatory hurdles, global demand fluctuations, and intense competition could impact profitability and market share.

Additionally, reliance on global supply chains presents risks, as seen in recent disruptions.

For investors, thorough evaluation of each company's financial health, market position, and adaptability is essential.

While the industry offers enticing prospects, careful due diligence is necessary to navigate the risks and make informed investment decisions.

Happy investing!

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