6 Midcap Pharma Stocks That Sharekhan Has A Buy Ahead Of Q4 Results

Broking firm Sharkhan has recently come-up with Q4FY2022 Results Preview for the pharma Sector. The brokerage has a positive view on the stocks from the sector and has recommended some large and midcap pharma stocks to buy. Here are a few stock that are a buy from the midcap space, according to the brokerage firm.

6 midcap pharma stocks where the brokerage has a buy call

Name	Current market price	Target price
Laurus Labs	596	735
Sanofi India	7409	9600
Abbott India	18034	22780
Caplin Point Laboratories	774	1054
Alembic Pharma	779	1009
Medplus	1018	1227

Among the above, Sanofi is a stock that has the potential for a maximum upside, given the current market price of the stock. Sharekhan had earlier done a report on Sanofi and said that the management commentary was positive.

Sector view remains positive

The growth of pharmaceutical companies in Sharekhan's universe is expected to be in high single digits yoy driven by an expected strong show from the India businesses, while the US sales are expected to be under stress.

"The growth is likely to reflect heightened competitive pressures, lack of new product / plant approvals for the US business, On the other hand, strong growth in the Indian Pharmaceutical market (IPM) due to the revival in acute therapies bodes well from a growth perspective. Further, high operating margins base in Q4FY21, increased raw material costs, high logistics costs are likely to exert pressures on margins of pharma companies in Q4FY22, leading to a likely decline of 5.6% y-o-y in earnings. Amongst the companies in the universe, we expect Divis Labs, Sun Pharma and Cipla to outperform for the quarter," the brokerage has said.

Long-term growth prospects stay bright

According to Sharekhan, the Indian pharmaceutical companies are better placed to harness opportunities as they are competitive globally and hold a sizeable market share in most markets.

"Moreover, other factors such as 1) long-term opportunities in the US with increasing preference for specialty/complex generics (including biosimilars) and injectables, 2) expected healthy growth in IPM, which is expected to stage close to double-digit growth in FY2023 as well, and 3) emerging opportunities in the API space would be key growth drivers over the medium to long term; while in the near term, pricing pressures in the US, elevated cost pressures and Geopolitical stress between Russia & Ukraine could act as headwinds, though transient in nature. Collectively, this points towards a strong growth potential over the long term for Indian pharma companies," the brokerage has said.

Valuations and views

According to Sharekhan, the Nifty Pharma has under performed the benchmarks, factoring in transient headwinds, which could drag the performance of companies in the near term. "Over the years, Indian pharmaceutical companies have developed strong capabilities and have proven to be a dependable source for global pharma companies. The confluence of other factors including focus on specialty/complex products in addition to emerging opportunities in the API space would be key growth drivers. Collectively, though near term headwinds are likely to sustain, long term growth prospects are intact and, based on this, we have a Positive view on the sector," the brokerage has said.