3 Micap Pharma Stocks To Buy As Recommended By Sharekhan

Pharma stocks have taken a beating including stocks like Aurobindo Pharma and Divi's, which have hit 52-week lows. Here are a few midcap stocks to buy as listed by top broking firm Sharekhan.

Strides Pharma Sciences: Buy the stock with a price target of Rs 450

Sharekhan has a buy call on the stock of Strides Pharma Sciences with a price target of Rs 450 on the stock. "Strides' US business was impacted by multiple headwinds such as high price erosion, which has stabilised and is likely to improve going ahead. Moreover, the acquired portfolio has been integrated and has added to the company's performance. Based on this, Strides has guided for $250 million in revenue in the US for FY2023. ORM business is expected to post a strong recovery in the coming quarters with higher margins. Moreover, the company has implemented a cost-control plan, which is expected to yield benefits in the subsequent quarters," the brokerage has said.

Strides Pharma Sciences: Stock Valuations are reasonable

According to Sharekhan, the Strides Pharma Sciences stock trades at 17.3x its FY2024E estimates. Further, the stock price has corrected sharply by 35% from its 52-week highs with the valuations now appearing reasonable at 17.3x its FY2024E earnings. "On account of reasonable valuations and encouraging outlook for the US business, we retain our Buy recommendation on the stock with an unchanged price target of Rs. 450," the brokerage has said.

According to the brokerage, the key risks would remain any change in the regulatory landscape and adverse forex movements can affect earnings prospects.

Biocon: Buy the stock with a price target of Rs 340

According to Sharekhan, Biocon has laid a strong platform for growth of biosimilars in the insulin and oncology franchise across its key markets. Commercialisation of new products/tapping new geographies with existing products could strengthen its presence in the insulin and oncology space.

"This coupled with the efforts to increase penetration in existing markets and tap new areas of vaccines and the recent acquisition of biosimilars portfolio from a partner company could drive growth of biosimilars over the long term. Though in the near term, cost pressures are expected to overweigh. At the current , the stock is trading at P/E multiples of 32.9x/21.6x its FY2023E/FY2024E earnings. We retain our Buy rating on the stock with a revised price target of Rs. 340," the brokerage has said.

Caplin Point Laboratories: Good quarterly numbers

Caplin Point Laboratories Limited (Caplin) reported a strong Q2FY2023 performance. Revenue and PAT reported double-digit growth, backed by strong growth across geographies. While operating profit margin (OPM) contracted, double-digit topline growth led to benefits in operating leverage and higher other income, resulted in double-digit PAT growth. Revenue and PAT grew by 18% and 21% to Rs. 359.3 crore and Rs. 92 crore, respectively (OPM decreased by 393 bps to 29.4%).

Caplin Point: 22% Upside potential on the stock

According to Sharekhan, Caplin has established a strong presence in the semi-regulated markets of LATAM and is now set to chart out its growth path in the US, which opens up immense growth opportunities. "In existing LATAM markets, strong presence, product portfolio expansion, and plans to foray into bigger markets of Chile, Mexico, and Brazil would be key triggers. Caplin is undertaking capacity expansion, which provides growth visibility. The stock has corrected by 9% in the last four months and is currently trading at attractive valuations of 17.1x/14.5x its FY2023E/FY2024E EPS. We retain our Positive view on the stock and expect a 22% upside," the brokerage has said.

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