One sector whose shares are outperforming the benchmark stock indices and hitting new highs is the pharmaceutical sector. Given below are top five strong tactical buys from the pharma sector.
As the novel coronavirus pandemic spreads its wings across the globe, India and other countries have witnessed severe disruptions in supply-side in various sectors across the market. One sector whose shares are outperforming the benchmark stock indices and hitting new highs is the pharmaceutical sector. Even in the last trading session, Nifty Pharma was the only sectoral index that kept moving higher, while the BSE Healthcare index hit a fresh 52-week high. “Pharma as a sector has emerged as a strong contender to drive the next leg of the rally, whenever it comes. In anticipation, pharma stocks have seen a huge run-up in the last 10 days. This is not just true for India, but globally too pharma companies have performed well,” Edelweiss Professional Investor Research said in its latest report. The top five strong tactical buys from the pharma sector are given below:
1. Ajanta Pharma: India business saw 23 per cent CAGR from FY12 to FY16. Due to regulatory changes in the dermatology business, the company has seen lower growth (just 6% CAGR) over the last 3 years. But the 11% CAGR in 9MFY20 suggests improvement in the India business, brokerage and research firm said. “We expect FY20/21/22 EPS of INR 53/70/83, respectively,” Edelweiss Professional Investor Research said. At Monday’s close, the stock settled at Rs 1,377 apiece on BSE.
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2. Abbott India: Abbott India share price has gained a whopping 109% in FY20. Abbott India hit a 52-week high of Rs 18,500 on April 9. At yesterday’s close, it finished trade at Rs 17,228.40 per equity on BSE. “The company has a presence in high growth therapeutic categories – gastro, CNS (central nervous system), vaccines, OTC (Digene kind) and gynaecology – which led to better-than-industry growth,” the report added. Abbott is a pure-play domestic story, said the brokerage firm, adding that “We expect FY20/21/22E EPS of INR 313/360/416.”
3. Dr Reddy’s Laboratories: Dr Reddy’s Laboratories share price hit a fresh record high of Rs 3,853.85 on BSE in the previous session after the company announced that it has received an establishment inspection report (EIR) from the US health regulator for its Nalgonda-based active pharmaceutical ingredient manufacturing unit. “Dr Reddy’s Laboratories always had the highest SG&A (selling, general and administrative) expense, at 30%, compared to the industry average of 20%. However, in the last 1 year, SG&A expense has fallen to 23-24% levels, which has led to a 300 bps improvement in EBITDA margin on a 9MFY20 versus 9MFY19 basis,” the report said. At Monday’s closing, the stock traded to end at Rs 3,744.50 apiece on BSE.
4. Biocon: Biocon share price too hit a fresh 52-week high of Rs 355.25 in Monday’s session. Last year the company had launched Pegfilgrastim ($4bn) in the US. It received approval for Lantus ($6bn) last month. “We expect FY20/21/22 EPS of INR 7.5/10.2/13.4,” the report said. The stock settled at Rs 340.40 apiece on BSE in yesterday’s weak trade.
5. Laurus Labs: Laurus Labs share price ended at Rs 406.25 in Monday’s trade. The brokerage firm sees this stock with long term potential and strong catalysts. ” “The company has spent Rs 900 crore over the last 3 years to build capacity, which has led to negative free cash flow. We expect the company to start generating free cash flow from FY21,” the brokerage firm said in a report. It believes its earnings to shoot up to Rs 34 per share in FY21E from Rs 9 per share in FY19. “We expect FY20/21/22 EPS of INR 24/34/37,” said in a report.