Goldman Sachs Top Pharma Picks: Piramal and Syngene may see upto 26% upside but Dr Reddy’s faces 21% downside 

The brokerage has reiterated ‘Buy’ ratings on Piramal Pharma, Syngene International, Divi’s Laboratories, Aurobindo Pharma, Cohance Lifesciences and Neuland Laboratories, while maintaining ‘Sell’ ratings on Laurus Labs, Gland Pharma and Dr. Reddy’s Laboratories. 

Pharma Q1 preview: Goldman Sachs cautious

Goldman Sachs expects the sector to report around 12% year-on-year revenue growth in Q1FY27 but forecasts EBITDA margins to decline by about 185 basis points as companies grapple with an inferior product mix following the end of high-margin generic Revlimid revenues, along with elevated freight and raw material costs. 

The brokerage said it remains cautious on most US generic companies while continuing to favour select CRDMO businesses and a tactical exposure to US generics. “We remain selective and are Buy-rated on Divis, Piramal, Neuland, Syngene and Cohance on the CRDMO side and Aurobindo on generics,” Goldman Sachs said.

Goldman Sachs on Piramal Pharma

Goldman Sachs has maintained its ‘Buy’ rating on Piramal Pharma with a target price of Rs 225, implying an upside of about 26%, the highest among its preferred pharma names.

The brokerage continues to view the company as a turnaround play and believes improving execution across its businesses could drive earnings growth over the coming years. Goldman Sachs expects revenue to grow 14% in FY27, followed by 18% in FY28 and 14% in FY29, while EBITDA margins are projected to improve from 12.8% in FY27 to 19.9% by FY29.

The brokerage said it remains positive on Piramal Pharma despite making only marginal changes to earnings estimates, keeping the company’s long-term turnaround thesis intact.

Goldman Sachs on Syngene International

Goldman Sachs has retained its ‘Buy’ rating on Syngene International with a target price of Rs 525, implying an upside of around 22%.

The brokerage continues to like Syngene for its exposure to the CRO/CDMO opportunity and the structural China+1 manufacturing shift. Goldman Sachs expects the business to benefit as global pharmaceutical companies continue diversifying supply chains and outsourcing research and manufacturing.

It forecasts EBITDA margins to improve from 25.1% in FY27 to 28.4% by FY29, while earnings are expected to accelerate meaningfully over the medium term.

Goldman Sachs on Divi’s Laboratories

Goldman Sachs has maintained its ‘Buy’ rating on Divi’s Laboratories with a target price of Rs 8,025, implying an upside of around 17%.

The brokerage recently upgraded Divi’s and continues to view it as one of the key beneficiaries of opportunities emerging from GLP-1 drugs. It expects the company’s strong API franchise and expanding manufacturing capabilities to support sustained earnings growth.

“We recently upgraded Divi’s Labs as a key beneficiary of GLP-1 opportunities,” Goldman Sachs said.

Goldman Sachs on Aurobindo Pharma

Goldman Sachs has reaffirmed its ‘Buy’ rating on Aurobindo Pharma with a target price of Rs 1,750, implying an upside of about 10%.

The brokerage continues to view Aurobindo as its preferred tactical play on the US generics market. It raised FY27-FY29 earnings estimates by up to 7% after factoring in continued traction in the company’s US and European businesses and the benefits from the Lannett acquisition.

“Aurobindo: We raise our FY27-29E EPS by up to 7%, to factor in continued traction in the US/EU base business and Lannett acquisition,” Goldman Sachs said.

Goldman Sachs on Cohance Lifesciences

Goldman Sachs has maintained its ‘Buy’ rating on Cohance Lifesciences with a target price of Rs 500, implying an upside of around 10%.

The brokerage continues to prefer the company for its complex manufacturing capabilities but lowered its earnings estimates after incorporating a slower-than-expected ramp-up in its CDMO business.

“Cohance Life: We cut our FY27-29E EPS by up to 45% to primarily factor in a relatively slower product ramp-up in the CDMO business, especially in the near term,” Goldman Sachs said.

Goldman Sachs on Neuland Laboratories

Goldman Sachs has retained its ‘Buy’ rating on Neuland Laboratories with a target price of Rs 20,550, implying an upside of around 9%.

The brokerage continues to favour Neuland for its exposure to new molecule commercialisations. Although it has revised earnings estimates to better reflect the timing of shipments for key CMS products, Goldman Sachs believes the company’s long-term growth opportunity remains intact.

“Neuland: We change our FY27-29E EPS by -8% to +2% to better factor in phasing of shipments of key CMS products over the near-to-medium term,” Goldman Sachs said.

Why Goldman Sachs remains cautious on other pharma stocks

While Goldman Sachs continues to favour select opportunities, it remains cautious on several other large pharmaceutical companies.

The brokerage has maintained a ‘Sell’ rating on Laurus Labs with a target price of Rs 1,100, implying a downside of about 28%. It also retains a ‘Sell’ rating on Gland Pharma with a target price of Rs 1,875, indicating a downside of around 24%, while Dr Reddy’s Laboratories carries a ‘Sell’ rating with a target price of Rs 1,075, implying a downside of approximately 21%.

Among the Neutral-rated names, Goldman Sachs remains on the sidelines on Lupin, Cipla and Biocon, while Sun Pharma and Torrent Pharma continue to be Not Rated.

Sector outlook: Revenues improving but margins remain under pressure

Goldman Sachs expects domestic pharmaceutical demand to remain healthy, supported by improving volume growth, favourable pricing and continued momentum from new product launches, including semaglutide.

“While volume growth has started improving over the past 3Q, healthy pricing (+5.8% yoy) coupled with new launch momentum from recent LoE including Semaglutide (+3.8% yoy) continued to drive growth (c.11.6% for India pharmaceutical market in Q1),” the brokerage said.

However, it expects profitability to remain under pressure as the contribution from high-margin generic Revlimid revenues fades and companies continue to face elevated freight and raw material costs.

“We expect the pressure on margins to sustain in Q1 as we bake in c.185bps of yoy margin decline for the group due to inferior product mix (no Revlimid) as well as higher inputs: especially with geopolitics impacting freight and raw material costs,” Goldman Sachs said.

The brokerage also said investors will closely monitor management commentary around domestic market trends, the outlook for US generics, margin guidance, progress on the US Biosecure Act and capital allocation strategies during the earnings season.

Conclusion

Goldman Sachs believes the June quarter is likely to underline a clear divergence within India’s pharmaceutical sector. While revenue growth remains healthy, margin pressures are expected to persist as the benefits of high-margin generic Revlimid sales fade and cost inflation weighs on profitability. 

Against this backdrop, the brokerage prefers companies with differentiated growth drivers and stronger execution.

Disclaimer: The market views and target prices expressed in this article are those of a third-party institutional brokerage and do not constitute direct investment advice, an endorsement, or a solicitation to buy, sell, or hold any specific securities. Equities and sectoral investments involve substantial market risk, including potential loss of principal. Readers are advised to consult a SEBI-registered investment advisor before making any financial decisions based on this information.

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