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4 Pharma Stocks To Buy That Can Generate Returns Up To 32%
Pharma stocks have been on a roll in the last 1-year, thanks to the buoyancy that we have witnessed in the markets. Emkay Global (India Equity Research) has come out with its latest report on the pharma sector. We have picked 4 stocks from its report, which have a buy call and can gain up to 32% based on the report.
Top stocks to buy from the pharma sector, according to Emkay Global
| Name | Current market price | Target price | Gains% |
| Aurobindo Pharma | Rs 735 | Rs 935 | 27% |
| Cipla | Rs 950 | Rs 1140 | 20% |
| Lupin | Rs 984 | Rs 1300 | 32% |
| Dr Reddy's | Rs 4932 | Rs 5755 | 17% |
Growth momentum in pharma picks-up
According to Emkay Global total sales data from IMS, IPM grew 18.3% yoy in Aug'21 vs. 15.4% yoy in Jul'21, aided by improving traction in the non-Covid products portfolio. On a MAT basis, IPM grew 17.5%, driven by volume growth of 8.2%, new product growth of 5.3% and pricing growth of 4%.
"Within our coverage, Dr. Reddy's grew at the fastest pace at 26% yoy, followed by Ipca at 25%. Cipla, Lupin and Sun grew in the range of 13% and 19%. Cadila grew at the slowest pace at
13.3%. Other notable outperformers were Emcure (28%), Alkem (27%) and Macleods (25%)," Emkay Global has said.
Domestic revenues to see decent growth
"We expect domestic revenue growth for our coverage companies to be in the mid to high teens in FY22. However, IPM's growth momentum is expected to moderate in the coming months due
to the relatively stronger base of H2FY21," the brokerage has said.
| P/E FY 22 (E) | P/E FY 23 (E) | |
| Aurobindo Pharma | 13.0 | 11.6 |
| Cipla | 27.8 | 20.9 |
| Lupin | 24.9 | 20 |
| Dr. Reddy's Lab | 28.4 | 19.7 |
Based on the above, Aurobindo Pharma at the moment looks cheapest in terms of potential price to earnings ratio in the next couple of years. While recommending stocks from brokerage reports, we would like to also warn our readers that the markets are extremely expensive at the current levels on the Sensex and the Nifty and therefore please do exercise some caution. The risk of the markets falling from highs is always possible, though pharma stocks to some extent can be more of a defensive play.
Disclaimer
Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage houses are not liable for any losses caused as a result of decisions based on the article.
