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Buy These 4 Pharma Stocks For Potential Gains Up To 25%, Recommended By Leading Brokerage Firm

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KR Choksey, a leading brokerage firm in its Q1 FY 23 result preview on the pharma sector has recommended a 'buy' rating to 4 major stocks with gains up to 25% in 12 months. The brokerage in its reports stated that Indian Pharma Market (IPM) reported a 2.0% YoY rise in sales in Q1FY23, as expected, driven by a 3.0% YoY decline in sales volumes, while prices grew at 5.0% YoY; partially offset by 1.0% YoY decline in new product launches for Q1FY23. This was a result of higher revenue earned by Indian Pharma players, in Q1FY22, due to COVID 19's second wave, then.

 

According to the brokerage, "For Q1FY23E, we expect our coverage universe to post an 8.8% YoY decline (+7.0% QoQ) in sales, due to the high base effect. However, improvement in sales on a QoQ basis is positive, which is likely to be the result of the complete opening up of local and global economies, post-pandemic."

Sun Pharmaceutical Industries Limited

Sun Pharmaceutical Industries Limited

The Current Market Price of Sun Pharmaceutical Industries is Rs 882.80 per share on NSE. Its 52-week low is Rs 672.55 hit on 28 July 2021. Whereas, the 52-week high it touched on 29 April 2022 at Rs 967.05 per share.

Last week, it gained 2.98%, whereas, in the last 1 month, it gained 11.27%. The stock has given 28.25 in the last 1 year and 52.67% in the last 3 years, respectively. It has given multibagger returns of 107.3% in the last 3 years.

The brokerage suggests buying for a target price of Rs 1,074 per share. It has the potential to gain 22% in 12 months.

As per brokerage, "Sun Pharma's sales are likely to grow at 10.7% YoY (+13.9% QoQ), driven by strong growth in the India formulations segment due to Sun's large market share position, strong product launches, and increased MR strength planned in India; and likely strong sales growth in its specialty products (Ilumya, Cequa, and Odomzo) globally and in the US; partially offset by competitive pricing scenario in the US. The EBITDA margin is expected to decline marginally by 34 bps YoY (+480 bps QoQ) to 27.9% due to a likely rise in raw materials costs; partially offset by an improved products mix."

Dr Reddy's Laboratories Limited
 

Dr Reddy's Laboratories Limited

The Current Market price of Dr Reddy's Laboratories is Rs 4,466.10 per share. It was opened at Rs 4,546 per share. The 52-week low of the stock was recorded on 04 March 2022 at Rs 3,654 per share and the 52-week high was recorded on 16 July 2021 at Rs 5,450 per share.

The stock in the last 1 week slid down nearly 0.78% and moved up roughly 7.7%, respectively. In the last 1 year, its share slid down 17.39%. It gave a massive 68.18% and 64.26% in the last 3 and 5 years, respectively.

The brokerage suggest buy for a target price of Rs 5,261 per share. Considering the Current Market Price, it ah the potential to gain 18% in 12 months.

Commenting on the Dr Reddy's, the brokerage stated, "Revenue is expected to grow at 9.6% YoY (+3.1% QoQ) in Q1FY23E, driven by rise in India, the US, and Emerging Markets formulations revenue on the back of high-value products such as gVascepa and gVasostrict and awaited gRevlimid' s launch in the US (with 180 days' exclusivity), and rise in specialty revenue. The company has bought injectable product portfolio in the US and Cardio product portfolio in India in Q1FY23. The EBITDA and adjusted net profits are expected to grow by 36.6% YoY (+16.7% QoQ) and 27.9% YoY (+0.1% QoQ), respectively, due to improved margins YoY and QoQ."

 

Zydus Lifesciences Ltd.

Zydus Lifesciences Ltd.

The current market price of Zydus Lifesciences is Rs 358.25 per share, opened at Rs 370 per share. It hit the 52 week low at Rs 319 on 11 May 2022, whereas, the 52 week high it touched on 19 July 2021 at Rs 650.90 per share.

In the last 1 week, its stock fell 3.36% and gained 6.72% in the last 1 month, respectively. The stocks of the company in the last 1 year slid down by 44.36%, whereas, it gained a massive 54.99% in the last 3 years. On 5 years, it slid down by 31.69%.

The brokerage has given a buy rating with a target price of Rs 445 per share. The stocks have the potential to surge 25% in 12 months.

According to the brokerage, "Zydus Lifesciences is expected to post revenue growth of 4.4% YoY (+8.8% QoQ) due to likely strong performance in India, consumer wellness and formulations segments, both in India and emerging markets. The EBITDA margin is expected to decline marginally by 9 bps YoY to 23.1% on account of a decline in GPMs YoY due to higher raw materials costs, partially offset by stable other costs YoY and a reduction in it, QoQ."

Ami Organics Ltd.

Ami Organics Ltd.

The Current Market Price of Ami Organics is Rs 1,065.25 per share. Today it gained 3.63%. Its 52 week low is Rs 766.10 recorded on 24 February 2021, and 52 week high is Rs 1,434.45 per share recorded on 22 September 2021.

The stock of the company last in week slid down by 1.64% and moved a massive 23.37% in the last 1 month, respectively. In the last 3 months, it gained a minor 1.69% and slid down by 0.11%, respectively.

The brokerage has given a buy ratio with a target price of Rs 1,229 per share. It sees potential, gains of 16% considering the current market price and the target price.

"We anticipate 21.6% YoY growth in topline in Q1FY23. On EBITDA front it is expected to jump 22.6%/5.45% YoY/QoQ. Margins are expected to improve on sequential basis, up 180bps QoQ and 17bps on YoY basis. Its operational efficiency with ability to pass on incremental input costs with rise in its KSM prices to support the performance. It is expected to deliver PAT of Rs 2,050 Mn during the quarter," the brokerage has said.

Pharma Stocks

Pharma Stocks

Pharma StocksCMPTarget PricePotential GainsMarket Cap
Sun Pharmaceutical IndustriesRs 882.80Rs 1,07422.00%Rs 211,813
Dr Reddy's LaboratoriesRs 4,466.10Rs 5,26118.00%Rs 74,334
Zydus LifesciencesRs 358.25Rs 44525.00%Rs 36,675
Ami OrganicsRs 1,065.25Rs 1,22916.00%Rs 3,881
 Sector Outlook

Sector Outlook

Indian Pharma Market is expected to grow at a mid-to-high-single digit growth rate in FY23E, driven by price hikes the companies have taken during April - May 22, period. The ramp-up in specialty revenue will continue to more than offset the impact of competitive markets like the US and Europe. The pharma companies with strong product launch, pipelines of specialty products and focus on IPM are expected to continue to outperform. Similarly, CDMO and API Synthesizing companies have strong outlook as demand for innovative, specialty and biosimilars products rise.

K R Choksey said stated, " Our top picks in the sector are Sun Pharma (to outdo generic competitive pressure in the US with its specialty products' ramp-up and focus on IPM) and Dr. Reddy's (likely to benefit from high-value launches in the US and IPM market share gains)."

Disclaimer

The stocks have been picked from the KR Choksey 1QFY23 Result Preview reports. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decision.

Story first published: Monday, July 18, 2022, 19:19 [IST]
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