Jefferies has identified four small and mid-cap picks in the healthcare space with strong earnings potential, led by Emcure Pharma with 26% upside potential. Fortis Healthcare, Dr. Agarwals Health Care‘s and Gland Pharma are the other stocks in the brokerage’s list.
Jefferies expected the four companies to deliver 16-23% EBITDA growth in FY27, with earnings upgrades providing an additional potential catalyst.
Jefferies retained its ‘Buy’ rating on Emcure Pharmaceuticals Ltd. and set a target price of Rs 2,100, implying 26% upside. The brokerage expected the company to deliver 14% revenue growth and around 100 basis points of EBITDA margin expansion in FY27, at the upper end of management guidance.
Jefferies said export growth would be a key driver, supported by differentiated products such as gAmphotericin B, a broader complex injectable portfolio in Europe, first-generic opportunities in Canada and biosimilar launches across the rest of the world. Higher manufacturing-facility utilisation and better field-force productivity in India were also expected to support margin expansion.
The brokerage forecast 20% EBITDA growth and 32% profit after tax growth in FY27. It also noted that Emcure traded at 24 times one-year forward price-to-earnings, compared with 32 times for the comparable sector average.
Jefferies retained ‘Buy’ on Fortis Healthcare with a target price of Rs 1,125, which represented 24% upside. The brokerage said Fortis planned to add around 400 beds in FY27 and more than 1,700 beds over the next four to five years.
Jefferies said the additions would largely be brownfield and staggered, allowing new capacity to reach break-even within 6-9 months of commercialisation. This was expected to support steady double-digit hospital revenue growth over the medium to long term and improve margins as new beds ramp up.
The brokerage said management’s target of a 25% EBITDA margin by FY28, compared with 22.2% in FY26, looked achievable. Jefferies estimated a 17% EBITDA compound annual growth rate from FY26 to FY29 and said Fortis traded at a discount to Max Healthcare despite similar growth.
Jefferies upgraded Dr Agarwal’s Healthcare to ‘Buy’ and assigned a target price of Rs 1,150, indicating 18% upside. The brokerage said the company planned to add 60 centres by March 2027, taking its India network to around 350 centres.
Jefferies said execution in opening new centres had been strong and expected mid-teens same-store sales growth, supported by a combination of volume growth and premiumisation. It forecast a 23% EBITDA compound annual growth rate between FY26 and FY29.
The brokerage acknowledged that valuation was relatively high, with the stock trading at 27 times FY28 pre-Ind AS enterprise value to EBITDA, but said the premium was justified by the company’s superior growth prospects. Jefferies described Dr Agarwal’s as having the “best growth prospects within our healthcare coverage.”
Jefferies upgraded Gland Pharma to ‘Buy’ and set a target price of Rs 3,350, implying 17% upside. The brokerage said the successful turnaround of Cenexi had removed a key earnings overhang, while Gland’s core US business had returned to growth.
New differentiated launches and a better product mix were expected to support the US business, while several complex contract development and manufacturing organisation projects secured by Gland could add to revenue visibility, with commercialisation timelines extending into calendar years 2029-30.
Jefferies forecast 16% revenue growth and 22% profit after tax growth on a compound annual basis between FY26 and FY29. The brokerage also noted that management’s guidance of around 20% constant-currency revenue growth over the next four years was significantly above its and consensus expectations, leaving room for potential estimate upgrades.
At 34 times one-year forward price-to-earnings, Jefferies said Gland traded at a price-to-earnings-to-growth ratio of 1.5 times. The brokerage’s assessment was that “Operational challenges for Gland are clearly behind”.
Jefferies’ healthcare sector picks in small and midcap space include Emcure Pharma, Fortis Healthcare, Dr Agarwal’s Healthcare and Gland Pharma. The common thread across the four is a combination of expected earnings growth and valuation support, although the individual drivers vary significantly across pharmaceuticals, hospitals and eye-care services.