Time to go defensive this Diwali? These 2 pharma stocks could give you up to 20% returns

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Updated: Nov 02, 2018 5:10 PM

With Samvat 2075 on the doorstep, we take a look at the two pharmaceuticals stocks that could give investors up to 20% returns till next Diwali.

Samvat 2075, diwali sale in stock market, stocksSamvat 2075: We take a look at the two pharmaceuticals stocks that could give investors up to 20% returns till next Diwali.

The stock market has delivered muted returns to the investors till date in 2018 amid a depreciating rupee, higher crude prices, rising twin deficit, and trade war concerns. The rupee has fallen nearly 13% in FY19, while the broader markets have taken a beating. However, select blue-chip stocks could still be an attractive bet for investors this Samvat 2075, especially among the major pharmaceutical companies, and deliver returns of up to 20% till next Diwali.

Research and brokerage firm HDFC Securities believes that FY19 may witness a gradual comeback for large-cap pharma companies, driven by a variety of factors such as actual and likely regulatory resolutions and several product launches across categories in the medium term. Now with Samvat 2075 on the doorstep, the brokerage firm has given its pick of stocks in the segment for investment this Diwali. The stocks have been selected based on two criteria – capital preservation (for now) and alpha generation (for later), the report said.

Here, we take a look at the two pharmaceuticals stocks that may give investors up to 20% returns till next Diwali.

Sun Pharmaceuticals

Sun Pharma, India’s largest pharma company, derives nearly 33% revenues from the US, 30%  of the revenue is domestic and the rest of the world contributes 31% to its revenues. HDFC Securities has recommended a “buy” on the stock at Rs 573 (LTP as on 29 October, 2018) and add on dips to Rs 520 for a target price of Rs 690 till the next Diwali. “Sun Pharma trades at 22x FY20E earnings, which is compelling given strong earnings growth of 84% expected over the next two years. We estimate 15.5% revenue CAGR and 39% PAT CAGR over FY18-20E,” the report said.

Dr. Reddy’s Laboratories

Hyderabad-headquartered Dr. Reddy’s Laboratories Ltd has a promising complex generics pipeline, said HDFC Securities, recommending “buy” on the stock at the LTP of 2532 (LTP as on 29 October, 18) and add on dips to Rs 2210-2230 (21xFY20E EPS) for a target of Rs 2952 (28x FY20E EPS). “The company plans to capitalise on the first-mover advantage in China, increase the filing tempo, and break into the Top-10 (from No 16) in the Indian branded market. The stock price could reverse the underperformance witnessed in the last three years,” it added.

Disclaimer: Views and recommendations given in this section are the brokerage firms’ own and do not represent those of www.financialexpress.com. Please consult your financial adviser before taking any position in the stock (s) mentioned.

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