Pharma Q2FY26 Preview: A Transition Quarter Ahead
The Indian pharma sector is bracing itself for a transition quarter in Q2FY26, as various factors such as declining gRevlimid sales, GST-related de-stocking, and a weak acute season in India are expected to weigh on growth. According to brokerages, revenue growth is projected to be between 7-10% YoY, while earnings may rise only 4-5%, reflecting margin pressure.
Fading gRevlimid Opportunity
Lower US sales of gRevlimid are a major drag for companies like Dr. Reddy’s, Zydus, Aurobindo, and Cipla. Pharma stocks have been impacted by the decline in gRevlimid sales, which is a key product for these companies.
GST Impact in India
Channel de-stocking in September 2025 post-GST revision hit billing for 15-20 days, affecting the growth of pharma companies. The GST impact on pharma has been significant, and companies are still recovering from the effects of the tax revision.
Weak Acute Season
A slower demand for acute therapies has further curbed growth in the pharma sector. The acute therapy market has been affected by various factors, including changes in consumer behavior and preferences.
Margin Pressure
JM Financial expects low 20% EBITDA margins, while ICICI Securities projects 25% margin for coverage companies. The margin pressure on pharma companies is expected to continue, affecting their profitability and growth.
Sector Revenue Growth Expected at 7% YoY
Sector revenue growth is expected at 7% YoY, with earnings up 4%. Lupin is expected to lead peers with 20% revenue and 35% EBITDA growth, driven by the launch of Tolvaptan and no Revlimid exposure. Lupin stock price has been affected by the company’s growth prospects and product launches.
Zydus Lifesciences May Grow 12% YoY
Zydus Lifesciences may grow 12% YoY, aided by strong US and export sales. The Zydus Lifesciences stock has been impacted by the company’s growth prospects and product launches.
Sun Pharma to Grow 7% YoY
Sun Pharma is expected to grow 7% YoY, while Aurobindo and Cipla are expected to grow at 3-5% YoY. The Sun Pharma stock price has been affected by the company’s growth prospects and product launches.
Domestic-Focused Firms to See Stable India Growth
Domestic-focused firms like Torrent, JB, Emcure, and IPCA are expected to see stable India growth but lower margins. The domestic pharma companies have been affected by the GST impact and margin pressure.
CDMO Players to Post Softer Numbers
CDMO players like Piramal, OneSource, and Innova are expected to post softer numbers as stronger performance is expected in H2. The CDMO players in India have been impacted by the GST impact and margin pressure.
Key Positives and Concerns
Brokerages agree that Q2FY26 will be a soft quarter, marking a transition phase for the sector. Key positives include Lupin’s US launches, Divi’s strong CDMO traction, and resilient India growth for Sun and Torrent. Key concerns include gRevlimid erosion, GST-led destocking, pricing pressure, and US tariff risks. The pharma sector outlook remains cautious, with companies facing various challenges and uncertainties.