3 pharma stocks set to gain 25% as cardiac remains dominant therapy in Indian pharma market

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October 01, 2020 4:15 PM

According to the brokerage firm, Lupin, Glenmark, JB Chemicals, and Cipla are likely to gain market share among listed players.

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With the newsflow and developments around COVID-19 vaccine, pharma stocks continue to remain in focus. The Nifty Pharma index has rallied nearly 80 per cent from March lows. In comparison, the broader Nifty 50 index has surged 50 per cent from its March low of 7,511.10. Research and brokerage firm HDFC Securities is bullish on the pharma sector as cardiac is the largest therapy in the Indian pharma market, accounting for 13 per cent share. The brokerage firm expects it to remain a dominant therapy for the next 10-15 years. According to the brokerage firm, Lupin, Glenmark, JB Chemicals, and Cipla are likely to gain market share among listed players, and Mankind & USV could gain market share among unlisted players.

The top picks of the brokerage firm are Aurobindo (buy, target price Rs 1,015), Cipla (buy, target price Rs 855) and Lupin (buy, target price Rs 1,185). HDFC Securities maintained an ‘add’ rating on Dr. Reddy’s (target price Rs 5,375), Sun Pharma (target price Rs 570) and Torrent Pharma (target price Rs 2,745). The brokerage firm has created a framework to rank companies based on key parameters that are critical to identifying potential outperformers in this space. “The key determinants, among others, are portfolio exposure to high-growth molecules, covered market, ability to build brands and historical performance vs the IPM,” it said in the report.

Top stocks to ‘Buy’

Cipla: The brokerage firm sees 10.59 per cent potential upside in the stock with a price target pegged at Rs 855 apiece. The buy rating has been premised on the improved traction in US on account of a ramp-up in gProventil (Perrigo’s exit to aid) and limited competition launches. HDFC Securities in its report highlighted that respiratory pipeline and speciality assets add longer-term growth visibility. India business should outperform the market driven by continued traction in trade generics, COVID drugs portfolio and benefits of implementation of One-India strategy (double-digit growth for three quarters, pre-COVID).

Lupin: HDFC Securities has a ‘buy’ rating on the stock with an upside of 15.04 per cent. Its rating is premised on recovery in US business led by a ramp-up in gProAir (Perrigo’s exit to aid) and market share gains in Levothyroxine; India business to bounce back and grow ahead of the market; operating leverage to aid margin expansion of ~600bps over FY20-23e. “We increased our TP to Rs1,185 as we rolled forward to Sep 22 EPS. Maintain BUY,” it said.

Aurobindo Pharma: The brokerage firm has increased its target price to Rs 1,015 as it rolled forward to Sep 22 EPS. It has a potential upside of 24 per cent from today’s close. It has assigned a ‘buy’ rating to the stock on strong growth momentum in the US (ex injectables), improving pipeline in the US as the company targets complex /differentiated opportunities. “On the regulatory front, desktop review and potential resolution of plants (Unit I, IX, VII – OAI status and Unit XI – warning letter) will be the key trigger in the near term,” it said.

(The stock recommendations in this story are by the respective research and brokerage firm. Financial Express Online does not bear any responsibility for their investment advice. Please consult your investment advisor before investing.)

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