Pharma is still not out of the woods and HDFC Securities has analysed three scenarios to gauge the impact of reciprocal tariffs while estimating a hit of 3-45% in the EBITDA of domestic pharmaceutical companies.
The 3 scenarios are:
(1) If 100% tariff is borne by Indian pharma companies, it will have a negative impact of 3-45% on FY27 EBITDA across its coverage universe. The company’s Earnings Before Interest, Taxes, Depreciation and Amortisation (EBITDA) is a measure of a company’s profitability.HDFC Securities in a note said that Aurobindo Pharma, Dr Reddy’s, Lupin, Sun Pharmaceutical Industries and Zydus Life) will be the worst impacted.
(2) If 50% tariff is to be borne by Indian pharma companies, it could lead to 2-22% impact on FY27E EBITDA, the note said.
(3) If 35% tariff (1/3rd of total tariff) is to be borne by Indian pharma players, then a 1-16% hit in FY27E EBITDA is pegged.
Also Read: Gland Pharma, Aurobindo, Lupin, and other pharma stocks surge up to 14% as Trump spares sector from new tariffs
Among the domestic companies, Dr Reddy’s Laboratories and Aurobindo Pharma’s proportion of US sales versus their overall sales, are highest at 46%, each. In USD terms, that translated to $1,302 million and $1,283 million, respectively in 9MFY25.
However, Sun Pharma has the highest US sales figures in US dollar terms at $1,457 million in 9MFY25, HDFC Sec’s brokerage note said. In percentage terms it is at 31%.
BNP Paribas assumes a 10% tariff is imposed on pharma products and sees a negligible impact on the pharma companies arguing that the tariff costs will be shared across manufacturers, members of the supply chain and the consumers. It expects a relief rally for the Nifty Pharma Index to continue after its 11% YTD decline.
HDFC Securities recommendations
— Eris Life: BUY | Target: 1,500
— IPCA: BUY | Target: 1,800
— Sun Pharma: BUY | Target: 1,970
— Alkem: ADD | Target: 5,700
— Aurobindo: ADD | Target: 1,350
— Lupin: ADD | Target: 2,330
— Torrent Pharma: ADD | Target: 3,640
— Zydus Life: ADD | Target: 1,120
— Mankind: ADD | Target: 2,830
— Dr. Reddy’s: REDUCE | Target: 1,280
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
