Morgan Stanley has reversed its preference between two of India’s leading pharmaceutical companies after the June quarter earnings, upgrading Torrent Pharmaceuticals while downgrading Mankind Pharma. The brokerage says Torrent Pharma now offers a stronger combination of earnings growth, integration-led gains from JB Pharma and a clearer opportunity in GLP-1 therapies, while Mankind Pharma‘s recent rally has left comparatively limited room for further upside despite healthy business momentum.
Morgan Stanley on Torrent Pharmaceuticals: ‘Overweight’
Morgan Stanley has upgraded Torrent Pharmaceuticals to ‘Overweight’ from ‘Equal-weight’ and raised its target price to Rs 5,623, which implies an upside of about 39.6%.
The brokerage added that the investment case on Torrent has strengthened considerably since it initiated coverage. Faster execution of the JB Pharma integration, improving earnings visibility and a stronger long-term growth profile prompted the upgrade and a higher valuation multiple.
“Torrent’s investment case has strengthened materially since our initiation, supporting an upgrade to Overweight,” Morgan Stanley added.
According to the brokerage, integration-related benefits are arriving ahead of schedule. It says cost synergies have already moved beyond the initial target of Rs 900 million and are now expected to exceed Rs 1 billion. Morgan Stanley estimates annual cost synergies could rise to around Rs 3 billion in FY28 and nearly Rs 4.5 billion in FY29.
Another reason behind the positive view is Torrent’s position in GLP-1 therapies. The brokerage says the company has secured a 36% market share in semaglutide and a 94% share in oral semaglutide in India, strengthening its presence in one of the fastest-growing therapy categories.
“Torrent’s 36% semaglutide share and 94% oral share make its India GLP-1 opportunity materially more tangible,” the report explained.
Morgan Stanley also noted that Torrent’s base business revenue increased 19% year-on-year in the June quarter, while EBITDA rose 20% and operating margin stood at 33%. It expects revenue synergies from cross-selling, portfolio expansion and a larger sales force to become increasingly visible as the JB Pharma integration progresses.
Morgan Stanley on Mankind Pharma: ‘Equal-weight’
Morgan Stanley has downgraded Mankind Pharma to ‘Equal-weight’ from ‘Overweight’ and assigned a target price of Rs 2,735, implying an upside of about 10.6%.
The brokerage highlighted that the downgrade is driven by valuation rather than any deterioration in the company’s business performance. It noted that Mankind Pharma’s shares have gained about 30% since the end of March, compared with around 19% for the Nifty Pharma index over the same period, leaving relatively limited scope for additional gains.
“Mankind recovery priced in,” Morgan Stanley elaborated.
The brokerage added that the company’s June quarter performance remained broadly in line with expectations. Revenue increased 13% year-on-year, EBITDA margin expanded to 26%, domestic business growth improved to around 11%, chronic therapies grew 16%, while international revenue increased 29%, supported by the BSV business and US product launches.
The management continued to guide for double-digit domestic growth during FY27 and has maintained EBITDA margin guidance of 25.5% to 26.5%. Morgan Stanley, however, pointed out that further upside would require earnings growth to exceed the current trajectory already reflected in the stock price.
Why Morgan Stanley now prefers Torrent over Mankind
Morgan Stanley said its latest rating changes are based on relative risk-reward rather than a negative view on Mankind Pharma.
According to the brokerage house, Torrent Pharmaceuticals now offers a stronger mix of earnings visibility, integration-led gains, operating leverage and growth opportunities through GLP-1 therapies. Mankind Pharma continues to deliver healthy operational performance, but Morgan Stanley says much of that improvement has already been recognised by the market.
“Earnings visibility and valuation upside have shifted in Torrent’s favour, prompting our Overweight/Underweight reversal,” Morgan Stanley added.
Conclusion
Morgan Stanley’s latest report marks a change in stock preference within the pharmaceutical sector. The brokerage listed out the key reasons why they believe Torrent Pharmaceuticals now offers the stronger opportunity because of faster integration benefits from JB Pharma, improving profitability and a clearer long-term growth pipeline. However, they reiterated that fundamentals for Mankind remain intact and the downgrade is more a function of the fact that the recovery is priced in the stock.
Disclaimer: market research, ratings, target prices, and stock views expressed in this article are derived from brokerage reports and are presented for informational and educational purposes only. They do not constitute investment advice, financial guidance, or an offer or solicitation to buy or sell any security. Equity investments are subject to market risks, and historical performance or price projections do not guarantee future returns. Readers are strongly advised to conduct their own independent research and consult a SEBI-registered financial advisor before making any investment decisions.
This disclaimer has been generated using AI to support user well-being and responsible content consumption.