Despite the recent correction in CRDMO stocks, Kotak remains constructive on the structural opportunity in the space. Garude believes there have been no incremental negative developments in recent months that alter the long-term thesis.
While concentration risks in certain molecules or large clients have created volatility for companies such as Syngene and Piramal Pharma — and similar issues have surfaced at smaller players — the broader outlook remains intact.
Within CRDMOs, Sai Life Sciences is preferred from a near-term perspective, supported by its strong execution and pipeline visibility. Syngene and Piramal Pharma are viewed more favourably over a longer three-to-four-year timeframe.
In US generics, Garude suggests a bottom-up approach, with stock-specific fundamentals driving returns. Kotak’s preference within the large-cap universe is led by Sun Pharma, followed by Lupin and Cipla.
Lupin remains a key pick given its meaningful US exposure and pipeline across biosimilars and complex generics, which should help offset the tapering of certain one-off opportunities. Cipla, after a relatively muted phase in the US business excluding Revlimid, has multiple respiratory and peptide launches lined up that could support growth over the next few years.
Garude also pointed to the broader shift toward specialty and innovation. Lupin and Cipla continue to scale up specialty efforts, while Dr Reddy’s has been sharpening its focus on specialty markets outside the US.
Among midcaps, Kotak finds Sai Life Sciences, Emcure and Corona Remedies attractive.
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