Axis Securities Highlights Pharma and Hospitals Opportunities in Q3FY26 Top Conviction Ideas

Axis Securities flagged medium- to long-term opportunities in pharma and hospitals after Q3FY26 results. The brokerage cited strong India drug demand and steady hospital operations. It also pointed to near-term pressures in the US generics market and new hospital capacity. The findings appeared in its report, "Top Conviction Ideas - Pharma & Hospitals."

In Q3FY26, the pharmaceutical sector posted 12.3% YoY growth, led by India at 12% YoY. US revenue stayed softer due to lower gRevlimid sales. India’s IPM grew 12% YoY on chronic therapies. GLP-1 drugs, including Tirzepatide and Semaglutide, kept strong momentum.

Lupin and Dr Reddy's showed healthy trends, helping offset US generics pressure. Axis Securities noted price erosion risks after US shortages eased. In India, a weak acute season and NLEM also weighed on growth. For the medium term, new products like GLP-1 biosimilars and peptides supported sales expectations.

Axis Securities also linked India growth to field force expansion and newer launches. It expected better full-year margins as cost inflation normalised. US price erosion was also expected to moderate. Key monitorables remained price erosion, margin expansion, and the pace of new product launches. US generics portfolio performance stayed important.

Healthcare revenue rose 15% YoY in Q3FY26, though margins faced temporary pressure from bed additions. Occupancy stood at 61%, while ARPOB averaged Rs 62,000. EBITDA margin came in at 22.9%. Operating leverage from mature assets helped, but new facilities reduced overall margins for now.

Operational bed days increased 13% YoY, aided by higher surgical mix and better insurance penetration. In the short term, Axis Securities flagged heavy peer competition and bed oversupply in select micro markets. It also pointed to delays in commissioning beds. Over time, higher occupancies and stronger ARPOB were key expectations.

Q3FY26 Axis Securities view on structural trends

Axis Securities said structural growth continued in healthcare due to insurance, surgical volumes, and ARPOB trends. It expected new-bed margin pressure to ease with ramp-ups. Mature hospitals like Max Healthcare and Fortis were already showing operating leverage. It also tracked occupancy improvement, bed utilisation, payer mix, and new project commercialisation.

Q3FY26 Axis Securities top conviction ideas

Axis Securities preferred pharma firms with chronic portfolios, biosimilars, and peptide pipelines. It named Lupin and Aurobindo Pharma as well-placed, citing US product performance and India operations. The report also highlighted hospital operators with visible utilisation gains. The brokerage listed four stocks with BUY calls and target prices.

Company	Recommendation	Target Price
Lupin Ltd	BUY	Rs 2,460
Aurobindo Pharma Ltd	BUY	Rs 1,345
Max Healthcare Institute Ltd	BUY	Rs 1,250
Fortis Healthcare Ltd	BUY	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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