Synopsis: Jefferies has shared its latest views on three leading pharma stocks. Here’s a look at its sector outlook, ratings, target prices, and why it prefers one stock over the other two.
Pharma stocks are back in focus after global brokerage Jefferies shared its latest views on Mankind Pharma, Dr. Reddy’s Laboratories, and Cipla. While the brokerage continues to see value in one stock, it believes the other two offer limited upside despite being among the country’s leading drugmakers.
This article outlines how we take a look at Jefferies’ outlook on the pharma sector, why it prefers Mankind Pharma over its peers, and what is keeping it cautious on Dr Reddy’s Laboratories and Cipla. We also break down the brokerage’s ratings, target prices, and the key reasons behind its stock preference. Sector Outlook:
Jefferies on Pharma Sector
Jefferies believes the pharma sector continues to offer selective opportunities rather than broad-based gains. The brokerage says investors should focus on companies with strong earnings visibility and improving business performance, as valuation differences across the sector have become more noticeable.
Cautious on Dr. Reddy’s and Cipla
The brokerage remains cautious on Dr. Reddy’s Laboratories and Cipla, saying their potential upside is limited even under optimistic assumptions. It estimates a best-case upside of around 14 percent for Dr. Reddy’s and 12 percent for Cipla, suggesting that much of the positive outlook is already reflected in their share prices.
Mankind Remains the Preferred Pick
Jefferies continues to prefer Mankind Pharma over its peers. According to the brokerage, even its downside scenario points to only an 11 percent decline, which it believes is less likely as the company is already showing early signs of a business turnaround.
Key Factors to Watch
The brokerage noted that Dr. Reddy’s would require very optimistic assumptions to generate meaningful gains, while Cipla’s bullish case depends on the timely approval of two drugs in the US market. Jefferies believes those approvals are unlikely in the near term, limiting the upside potential for the stock.
Stock Preference of the Brokerage
Dr. Reddy’s Laboratories Ltd
Jefferies has maintained an “underperform” rating on Dr. Reddy’s Laboratories with a target price of Rs 1,040, implying a downside of around 16 percent from the previous closing price. The brokerage believes the stock’s valuation leaves limited room for further gains despite recent debates around its outlook.
According to Jefferies, even under its most optimistic assumptions, Dr. Reddy’s offers only about 14 percent upside. The brokerage believes the company’s earnings outlook does not justify a significantly higher valuation, making the stock less attractive compared to other opportunities in the pharma sector.
Cipla Ltd
Jefferies has also assigned an “underperform” rating to Cipla with a target price of Rs 1,120, indicating a downside of nearly 22.3 percent from its previous close. The brokerage believes expectations around the stock remain relatively high despite near-term uncertainties.
The brokerage said Cipla’s bullish case largely depends on the timely approval of two drugs in the US market. However, Jefferies believes these approvals are unlikely to come in the near term, limiting the stock’s upside potential even under favourable conditions.
Mankind Pharma
Jefferies remains positive on Mankind Pharma and has reiterated its “buy” rating with a target price of Rs 3,000, implying an upside of around 18.2 percent from the previous closing price. The brokerage sees the company as its preferred pick within the sector.
According to Jefferies, even its downside or “rainy day” scenario suggests only about 11 percent downside, which it considers a low-probability outcome. The brokerage pointed to early signs of a business turnaround, which it believes could support earnings growth and improve investor confidence over the coming quarters.
Which Stock Does Jefferies Prefer?
Among the three pharma companies, Jefferies clearly prefers Mankind Pharma. The brokerage believes the stock offers the best risk-reward profile, supported by early signs of a business turnaround and stronger earnings potential. It has maintained a “buy” rating with a target price of Rs 3,000, implying a strong upside.
In comparison, Jefferies remains cautious on Dr. Reddy’s Laboratories and Cipla, as it believes their upside is limited while downside risks remain meaningful. The brokerage expects Dr. Reddy’s to deliver only modest gains even under optimistic assumptions, while Cipla’s bullish case depends on regulatory approvals that it believes are unlikely in the near term. As a result, Mankind Pharma remains Jefferies’ top pick in the sector.
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