From Max Healthcare To Fortis: Top 4 Conviction Stock Picks For FY26 From Pharma & Hospitals Space

As per the latest report named "Top Conviction Ideas - Pharma & Hospitals," prepared by the Research Team at Axis Securities, the Q3FY26 results highlight robust domestic pharma growth and strong operational momentum in healthcare, underscoring attractive investment opportunities for medium- to long-term investors.

Q3FY26 Review - Pharma & Healthcare Performance

The pharmaceutical sector reported 12.3% YoY growth, led by India (+12% YoY), while US revenues were slightly muted due to lower gRevlimid sales. Chronic therapies drove India's IPM (+12% YoY), with GLP-1 therapies like Tirzepatide and Semaglutide maintaining strong momentum. Lupin and Dr Reddy's delivered healthy performance, offsetting US generics pressures.

Healthcare reported 15% YoY revenue growth, though margins were temporarily under pressure from new bed additions and ramp-ups. Occupancy stood at 61%, with ARPOB averaging Rs 62,000. EBITDA margins were 22.9%, reflecting operating leverage from mature assets partly offset by new facilities. Operational bed days rose 13% YoY, supported by a higher surgical mix and improved insurance penetration.

Short and Medium-term Outlook - Pharma

Short Term

• Trend in price erosion after the normalisation of drug shortage supply in the US.
• India: Weak acute season and NLEM impacted growth

Medium Term

• Better sales growth led by new products GLP-1 Biosimilars and Peptides.
• Field force expansion to drive growth in India.
• Better margins for the full year due to normalised cost inflation and moderation in US Price Erosion.

Key Monitorables - Price Erosion, Margins Expansion, and Launch of New Products

Short and Medium-term Outlook - Hospitals

Short Term

• Intense competition among peer hospitals and oversupply of beds in micro markets.
• Delays in commissioning beds.

Medium Term

• Higher occupancies and improved ARPOB across the industry.
• Key therapies like Cardio and Oncology are growing by double digits.
• Insurance payor, Purchasing Power, and Surgical mix pacing momentum are key drivers.

Key Monitorables - Improved occupancies; Insurance penetration; New hospital projects

Outlook - Strong Structural Growth Ahead

For pharma, companies with robust domestic chronic portfolios, biosimilars, and peptide pipelines are poised to outperform the broader IPM. Lupin and Aurobindo Pharma are particularly well-positioned with strong US product performance, successful launches, and market-leading India operations.

Healthcare continues to see structural growth, driven by insurance penetration, higher surgical volumes, and favourable ARPOB trends. Temporary margin pressures from new beds are expected to ease, while mature hospitals like Max Healthcare and Fortis are already delivering strong operational leverage.

Key Monitorables

Pharma:

• Price erosion trends and margin expansion
• Uptake of new product launches, especially GLP-1 and peptides
• US generics portfolio performance

Hospitals:

• Occupancy improvement and operational bed utilisation
• Rising insurance penetration and favourable payer mix
• Ramp-up and commercialisation of new hospital projects

Top Conviction Ideas As Per Axis Securities

• Lupin Ltd - BUY | Target Price: Rs 2,460
• Aurobindo Pharma Ltd - BUY | Target Price: Rs 1,345
• Max Healthcare Institute Ltd - BUY | Target Price: Rs 1,250
• Fortis Healthcare Ltd - BUY | Target Price: Rs 1,070

"We believe these companies combine strong fundamentals, resilient growth drivers, and robust operational execution, creating an attractive opportunity for medium- to long-term investors. Aligning your portfolio with these high-conviction ideas positions you to benefit from the anticipated Q4FY26 earnings acceleration and the structural uptrend across the Pharma and Hospital sectors," Axis Securities said in a report.

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