In line with the broader markets, pharma stocks have done reasonably well. The advent of Covid last year, has led to a select surge in pharma stocks, as healthcare is back in the limelight. Here are 2 pharma stocks that can generate good returns for investors according to broking firm, Emkay Global.
Emkay Global has set a price target of Rs 1,300 on the stock of Lupin, which signifies a nearly 30% upside on the stock from its current market price of Rs 997.
Double-digit revenue growth guidance was maintained but margin guidance was lowered to 17- 18% in H2FY22 vs. 19-20% for FY22, Emkay Global has said.
"The US business was marred by price erosion in key products such as Famotidine, L-thyroxine and Metformin, failure to supply penalty related to Albuterol and transitioning to long-term contracts for Albuterol," the brokerage has said.
Adjusted for one-time licensing fees, revenue/EBITDA/PAT missed Emkay's estimates by 10%, 32% and 37%. The revenue miss was largely driven by substantial miss in the US revenue. EBITDA miss was driven by lower-than-expected GM and higher employee costs, offset by lower operational expenditure.
"We reiterate our Buy rating on the stock but cut our target price of Rs 1,300 from Rs 1,325 as we modestly lower our earnings estimates for FY22/23/24 to reflect the Q1 miss, leading to a lower US revenue base," Emkay Global has said.
Emkay Global has set a target price of Rs 600 on the stock of Cadila Healthcare in the next 1-year, which is higher than the current market price of Rs 544.
"The management sounded confident of selling its limited vaccine supply (10-12mn/month) in the domestic market. We believe vaccine uptake beyond FY22 could be minimal. Hence, we reduce vaccine-related upside to Rs10 per share from Rs 50 per share.
Management reaffirmed the US launch expectation of 30+ products but expects low-single digit growth in FY22. Similarly, US growth in FY23 is also expected to be subdued. Growth in the US business will be driven by complex injectables and transdermal products," the brokerage has said.
The management of Cadila expects US revenue growth in low-single digits in FY22. "While the company plans to launch 30 plus products in the US, generic entry into Asacol may keep the growth in check. Management is expecting 1-2 additional generic entries in Asacol. Even for FY23, US growth is expected to be muted. US growth is expected to pick up once inejctables and transdermal products are commercialized. We estimate a mid-single digit decline in FY22 and flat US revenue in FY23 as the basket of in-licensed products (24 in total, of which 5 will be monetized in FY23) might offset the decline in Asacol," Emkay has said.
"We maintain Hold rating but reduce our target price to Rs 600 from Rs 640 as we lower the Covid vaccine upside. Our FY23/24E headline numbers are revised down meaningfully as we remove vaccine upside, but our core earnings estimates are maintained," the brokerage has added.
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