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Our healthcare coverage universe (ex-hospitals) is anticipated to keep slowing down. While revenue, EBITDA, and PAT grew 11%, 19%, and 21% YoY in FY25, 9MFY26 saw growth rates of 10%, 8%, and 9%, respectively. For 4QFY26, we expect revenue and EBITDA to grow 9% and 5.4% YoY, respectively, with a slight YoY dip in PAT for the quarter. Aggregate PAT is expected to decline marginally after 11 quarters of YoY growth, largely due to the YoY reduction in aggregate US generics revenue. Increased competition in some high-margin products may weigh on EBITDA and earnings in 4Q. This would be offset to some extent by currency benefit (INR depreciated ~6% YoY vs USD). Moreover, the domestic formulation (DF) segment growth is likely to be supported by demand revival in acute therapies and steady momentum in chronic therapies. The much-anticipated generic version of the diabetes/weight loss drug (semaglutide) was launched in India after patent expiry in Mar’26. The marketing/promotional spending would have some impact on 4Q performance, given that such activities are front-loaded and sales realization would happen in 1HFY27. USFDA ANDA approvals slowed in 4Q. The pace of USFDA regulatory inspections remained intact in 4Q.

Hospitals are expected to post ~15% YoY revenue growth, supported by capacity expansion and ARPOB improvement, though margins may remain under pressure due to ramp-up costs of new facilities. Overall, while near-term profitability across pharma and hospitals may be constrained by mix and cost pressure, strong volume drivers and capacity-led growth provide healthy medium-term visibility.

DF: Expect steady thrust in chronic; acute to witness uptick in YoY growth

Coverage companies to sustain DF segment growth momentum

For companies under our coverage, we expect aggregate DF segment sales to grow by 13% YoY to INR248b in 4QFY26. After a modest 4% YoY growth in 2QFY26, we expect an uptrend in YoY growth for the second consecutive quarter, supported by recovery in acute and strong momentum in chronic therapies. One key event in 4Q was the launch of the branded generic version of semaglutide in DF. Since it was launched almost at the end of 4Q, sales traction would be witnessed in the coming quarters. However, this is likely to result in high incremental marketing/promotional costs in 4Q. It would be interesting to watch out for the focus on base brands after the semaglutide launch, given strong demand tailwinds. That said, our coverage companies are expected to track industry growth, supported by continued product launches and an increasing focus on chronic therapy portfolios.

Chronic therapy growth remains resilient, acute recovery picks up

In the first two months of 4QFY26 (Jan’26/Feb’26), chronic therapies recorded strong growth of 16.5% YoY, in line with 16.7% YoY growth in 3QFY26 and strongly outperforming the 11.2% YoY growth seen in 1HFY26. Acute therapies witnessed strong momentum, with growth of 9.5% YoY in Jan’26/Feb’26 vs. 8.7%/6.3% YoY in 3QFY26/1HFY26. Robust traction in cardiac/anti-diabetic/VMN therapies supported outperformance vs. IPM in Jan’26/Feb’26. However, overall IPM growth was partially constrained by weaker trends in anti-infective, gastro, derma, and respiratory.

ERIS/DRRD to record strong YoY DF sales in 4QFY26

We expect ERIS/DRRD to report sales growth of 18%/16% YoY, driven primarily by price increases, new product launches and improved productivity of the medical representative (MR) force. ERIS is likely to deliver double-digit growth across its key therapies, with particularly strong momentum in derma, cardiac, and anti-diabetic therapies, as indicated by IQVIA data for the three months ending Feb’26. DRRD is expected to witness broad-based growth across therapies, led by stronger performance in pain/gastro. We also expect ZYDUSLIF to report 15% YoY growth, driven by robust expansion in its chronic therapies portfolio.

US sales: YoY growth trajectory to decelerate

Cipla/DRRD/ZYDUSLIF to drag down overall YoY growth

For our coverage universe, US revenue is expected to decline 6.2% YoY to USD2.3b in 4Q, driven largely by a sharp 28%/24% YoY decline in CIPLA/DRRD sales to USD168m/USD300m. We expect favorable forex tailwinds from INR depreciation to support sales growth of 3.5% YoY (in INR terms). Due to the ongoing US-Iran conflict, the freight cost has increased considerably in the second half of Mar’26. This might have some impact on profitability in 4Q. Excluding CIPLA/DRRD, US revenue is expected to grow 1% YoY. CIPLA/DRRD/ZYDUS are expected to post a decline in US sales due to lower sales of g-Revlimid.

LPC/GNP to be outperformers for the quarter

The overall decline in aggregate US sales would be mitigated by robust growth in LPC/GNP. LPC is likely to deliver strong US growth of 37% YoY, supported by g-Risperdal consta CGT exclusivity and continued traction in g-Tolvaptan/g-Mirabegron/g-Spiriva, offset by price erosion in the base portfolio and competition in g-Albuterol. Delayed competitor approval of g-Tolvaptan would extend the low-competition window, supporting continued growth. However, we expect GNP to deliver 31% YoY growth, primarily driven by milestone income from AbbVie.

Notably, we expect RUBICON to deliver 25% YoY growth due to new launches and continued market share gains in the base portfolio, aided by the specialty/ differentiated portfolio. TRP/ALPM should grow 24%/17% YoY in 4Q, aided by contributions from new product launches and improving base portfolio traction.

Pace of approval momentum expected to normalize across coverage universe

During the quarter, 11 facilities belonging to our coverage companies were inspected by the USFDA. At the industry level, final approvals stood at 184 in 4QFY26 (vs. 154 approvals in 3QFY26). For companies under our coverage, there were 49 final approvals in 4QFY26. The recovery from 2QFY26 lows and subsequent stabilization suggest gradual normalization in approval conversion and review momentum.

Hospitals: Capacity-driven growth is expected to support 4Q performance

For the hospital companies under our coverage, revenue is expected to grow 15% YoY to INR101.7b in 4QFY26, driven by consistent operational execution, significant expansion of bed capacities, and development of new facilities, collectively strengthening operating metrics. In 4Q, we expect EBITDA margins of our coverage companies to be ~18% and aggregate EBITDA to grow by 13% YoY.

Aggregate occupancy is expected to decline by ~70bp YoY, while ARPOB is likely to witness a modest uptick. Hospitals remain on a strong growth trajectory, driven by aggressive capacity additions, doctor onboarding, and steady demand momentum, supporting volume growth and gradual improvements in utilization. However, near-term margins are likely to remain under pressure due to high ramp-up costs related to new facilities, while profitability and return ratios are expected to improve over the medium term as occupancy stabilizes. Growth visibility remains strong, though medical tourism has seen a marginal impact amid geopolitical disruptions.

MAXHEALTH plans to add ~500 beds in FY27 at Sec-56 Gurugram through greenfield expansion. In FY27, APHS is set to commission four new hospitals in Hyderabad, Kolkata, Bangalore and Gurgaon, reinforcing its presence in high-potential metro markets. Alongside the ramp-up of the recently launched Pune facility, this expansion is expected to add ~1,500 beds, marking a meaningful scale-up in capacity and providing a strong growth runway over the medium term. Notably, ~50% of this capacity is likely to be operationalized in FY27. Medanta is adding 2,300 beds in Delhi/Mumbai/Guwahati.

We expect APHS to post 14%/19%/20% YoY growth in sales/EBITDA/PAT in 4QFY26. MEDANTA is expected to deliver sales growth of 21% and EBITDA/PAT decline of 1%/2% YoY. Profitability is likely to remain subdued as opex related to the recently commissioned Noida hospital continues to weigh on margins. MAXHEALTH is likely to deliver sales /EBITDA/PAT growth of 16%/11%/7% YoY. The strong revenue growth is supported by normalization of cashless insurance disruption and ramp-up of recently commissioned brownfield bed additions at Nanavati Max/Max Mohali. However, MAXHEALTH’s profitability shall be impacted by pre-commissioning expenses related to brownfield bed additions for the quarter.

LPC/GNP/RUBICON to outperform within the healthcare pack

* In 4QFY26, we expect LPC/GNP/RUBICON to deliver 51%/47%/47% YoY growth in EBITDA. Steady approvals in the US and the focus on chronic therapies in DF will support a superior show for LPC in 4QFY26.

* For GNP, income from the ISB2001 deal, along with continued scale-up of DF business, to drive financial performance. New launches and continued market share gains in the base portfolio, supported by an increasing contribution from specialty and differentiated products, should drive EBITDA growth for RUBICON in 4QFY26.

* DRRD/CIPLA/ZYDUS are expected to report a YoY decline of 26%/24%/15% in EBITDA for the quarter. Increased competition, leading to heightened pricing pressure on products, including g-Revlimid, may weigh on EBITDA performance.

* We have reduced our estimates for GNP/BIOS by 8.5%/8.1% for FY26, MAX/DRRD by 7%/5.3% for FY27 and APHS by 6.4% for FY28, reflecting our expectations of only a gradual recovery across its segments over the medium term.

* Our top ideas: Laurus Labs (superior execution), Apollo Hospitals (robust penetration), Medanta (maturing facilities), and Rubicon (differentiated US play).

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