After the strong rally between March and September, the recent consolidation in pharma stocks has made investors scout for other winners.
Pharmaceutical stocks have been nothing short of a vaccine for an investor’s portfolio this year. After the strong rally between March and September, the recent consolidation in pharma stocks has made investors scout for other winners. However, brokerage and research firm ICICI Direct believes that the consolidation may now be over. Fundamentally, improvement in exports of APIs and formulations are helping the pharmaceutical industry. To add to that, cost rationalisation has aided in improving operational performance. ICICI Direct said it expects the second half of this fiscal year to reflect the normalisation trend with better execution.
Target price: Rs 1065
Lupin Ltd is trading at Rs 940 per share. The stock has undergone a secondary corrective phase after witnessing sharp up move during April-September. “Currently, the stock has garnered support around 52 weeks EMA at Rs 882 that coincided with earlier key resistance of Rs 888 (as per change of polarity concept, earlier resistance would now act as key support) and forming a higher high – low on the weekly chart after seven weeks, indicating conclusion of corrective phase. Hence, it offers a fresh entry opportunity with a favourable risk reward,” ICICI Direct said in a note.
Fundamentally, Lupin has a strong market in the United States with 36% of its revenue coming from the States. The brokerage firm expects Lupin’s sales in the US to grow 6% during the financial years 2020-2023. Lupin ranks sixth in domestic formulations with a market share of 3.8%.
On the charts, Lupin finds support at Rs 845 per share. ICICI Direct highlighted that during the past three months corrective phase, Lupin has seen healthy retracement after witnessing faster pace of retracement, as it had entirely retraced 30 months corrective phase in just six months, which according to them, indicates a robust price structure. ICICI Direct recommends a stop loss of Rs 845.
Target: Rs 3310
Shares of the pharmaceutical firm are trading at Rs 2870 per share. In the previous three months the stock has corrected and on the charts is suggesting resumption of the up move. “The stock has recently rebounded forming a higher base near the lower band of the rising channel and the 52 weeks EMA, thus offering a fresh entry opportunity with a favourable risk reward set up,” ICICI Direct said. The target price of Rs 3310 is 138.2% external retracement of the recent corrective decline.
Alkem Laboratories took 17 weeks to retrace 61.8% of the previous 10 weeks rally (Rs 2222 to 3090). “A slower retracement signals higher base formation and a robust price structure,” the report said. A stop loss of Rs 2610 has been suggested.