Economic indicators have started turning positive which could start the upgrade cycle and liquidity flows across Emerging Markets could remain strong which bodes well for Indian markets.
Sustenance of the demand recovery after the festive season would be key to any further upside in the markets
Healthcare sector remained in focus during the year. The S&P BSE Healthcare index had touched a 52-week low of 10,948 in the third month of the calendar year 2020, since then it has nearly doubled to hit a fresh record high of 21,454 levels on COVID-19 vaccine hopes. Research and brokerage firm Motilal Oswal Financial Services is overweight on the Healthcare sector, along with IT, BFSI, Telecom and Auto sectors.
Analysts at Motilal Oswal said that the economic indicators have started turning positive which could start the upgrade cycle and liquidity flows across Emerging Markets could remain strong which bodes well for Indian markets. It also added that sustenance of the demand recovery after the festive season would be key to any further upside in the markets.
Divi’s Laboratories: The brokerage firm is bullish on Divis Laboratories due to its robust chemistry skill sets, strong business visibility ahead of capex, market leadership in select products, healthy balance sheet and consistently superior return ratios, chemistry skill sets, and efficient manufacturing capabilities. Motilal Oswal expects a 34 per cent earnings CAGR over FY20–23E, led by increased business prospects from CS and Generics as well as 770bp margin expansion on better operating leverage.
IPCA Laboratories: Motilal Oswal is positive on IPCA Labs on the back of steady outperformance in the DF segment, cost efficiency in API and traction in new APIs as well as continued momentum in existing API molecules – supported by opportunities arising from geopolitical tensions, products launches under its own label in the UK, and increased backward integration as well as debottlenecking. “We expect an earnings CAGR of 29% (FY20–23), supported by a sales CAGR of 12%/19%/29%/17% in the DF/API/Institutional/Generics segment and 610bp margin expansion owing to a better product mix and operating leverage,” it said.
Sun Pharmaceutical Industries: Based on its established presence in the chronic category and new launches in both the acute and chronic categories, Motilal Oswal Financial Services sees Sun Pharmaceutical as well-placed to outperform the industry over the next 2-3 years. “However, considering the COVID-led slowdown, we expect a 7% CAGR in India sales to INR120b over FY20–23E,” it added.
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