Bluechip Stocks For Long-term Investment In India

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The index has been hitting the roof as mutual funds flush with high amount of liquidity continue to drive stock prices higher. In the meantime it is difficult to find attractive valuations and we have picked a couple of stocks that could be bluechip stocks for long term investment.

Justification for buying Aurobindo Pharma

Aurobindo Pharma is a top Indian pharma company. The company has had among the highest approvals for Abbreviated New Drug Application (ANDA) last year. This is an application for a U.S. generic drug approval for an existing licensed medication or approved drug. This is extremely important to boost sales from the US. In the case of Aurobindo Pharma, the company is not overly reliant on any single product to boost sales unlike many companies where as much as 20-25 per cent of the revenues could come from a single or two products. This is very important in case there is a sudden US FDA ban on select products from a select plant. The company's US subsidiary is performing very well and there are plans to reduce corporate tax in the US, which should further boost profitability at the company.


Falling stock price

The stock of Aurobindo Pharma has fallen sharply from levels of Rs 890 to the current levels of Rs 623. The company recently received observations from the USFDA, which saw the stock price falling. However, the warning letter is not too serious and there could be a good remediation of the entire process. Aurobindo Pharma is one of the cheapest pharma stock of its size and scale and is among the top 5 pharma companies in India. The company has acquired several pharma companies in EU and supplies from the Vizag plant to Europe would make it among the top players in Europe in the next few years.


Attractive valuations

We believe that the company is on a very high growth trajectory and could report an EPS of at least Rs 50 by FY 2018-19. This means the stock is available at a very cheap valuation of around 12 times those earnings. If you value the p/e at its historic p/e of around 18 times, the stock should fetch a price of around Rs 900 in the next few years. Thus the stock remains an attractive bet at the current price of Rs 623. A good stock to buy at levels of Rs 600 or so.


This is another stock that has crashed from levels of Rs 1,800 to Rs 1,258 as the US FDA issued Form 483 with three observations to its Goa plant. While the observations could be quickly remedied, as is always, there is a sharp and swift reaction to prices and this is what has happened to the share price. However, at the current market price, Lupin remains at a p/e of just about 15 times one year forward earnings. However, what we suggest that you should look at buying Lupin shares only if there is a further erosion in the share price to around Rs 1,200 levels. The recent acquisition of Gavis in the US opens a big market for the company there. The US market would drive growth for the company there.



Predicting EPS estimates is always a big challenge, however, we believe that the company could report an EPS of Rs 80 by 2019. This means if you get the stock around Rs 1,200, you are getting the same at a p/e of 15 times. There are risks associated with EPS predictions, especially a sharp slowdown in the Indian pharma market where Lupin has a solid market share. In any case, this stock maybe a good long term bet at the current market price, considering that it has fallen to a new 52-week low. 





Best small cap stocks to buy

While we have suggested a few bluechip stocks from the largercap space, in the link below link we have suggested some small cap stocks that could interest you. Please click on the link to read further


This article is strictly for informational purposes only. It is not a solicitation to buy, sell in securities or other financial instruments. Greynium Information Technologies Pvt Ltd, its subsidiaries, associates and the author of this article do not accept culpability for losses and/or damages arising based on information in this article. 

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