ICICI Securities Is betting On These 3 Pharma Stocks For Over 16% Return

Buy Ipca Laboratories for a target of Rs 2,560 on the stock

According to ICICI Securities, Ipca is a fully integrated pharmaceutical firm that produces approximately 350 formulations, with exports accounting for 48 percent of total revenue. Pain management, cardiovascular and anti-diabetics, and anti-malarial are the most profitable therapeutic categories, accounting for 75% of total income.

"Apart from Ipca, we prefer Ajanta in our healthcare coverage because it focuses on launching a large number of first-time launches both domestically and internationally. BUY with a target price of Rs 2695", the brokerage has said.

Why ICICI Securities is bullish on Ipca Laboratories?

"Ipca's share price has grown by ~4.1x over the past five years (from ~Rs 488 in June 2016 to ~Rs 2026 levels in June 2021). We change our view from HOLD to BUY on this stock due to good traction in domestic formulations and growth in the medium term Target Price and Valuation: We value Ipca at Rs 2560 i.e. 25x P/E on FY23E EPS," the brokerage has said.

Key triggers for future price-performance:

• The total portfolio is poised for stable expansion, with incremental growth in other medicines (excluding malaria), especially noncommunicable diseases like pain management, cardio-diabetology, and so on.
• Due to USFDA import alerts for the Ratlam factory, which is the only API source for Silvassa and Pithampur formulations, momentum in the US will take longer.
• Sustained traction from branded and generics exports sales, along with a resurgence in the EU, is anticipated to buffer the US gap.

Buy Caplin Point Laboratories: ICICI Securities

Caplin earns all of its money from exports, with 92 percent of its sales coming from Emerging Markets (LatAm + Africa), where it has an end-to-end business strategy that includes last-mile logistics solutions for its exclusive distributors.

According to the brokerage, Caplin announced strong performance during the first quarter of FY22.
Sales increased by 25.1 percent year over year to Rs 300.4 crore; EBITDA increased by 29.3 percent year over year to Rs 92.6 crore, and adjusted PAT increased by 70.9 percent to Rs70.9 crore (up 29.9 percent YoY).

Why ICICI Securities is bullish?

"What should investors do? Caplin's share price has grown by ~3.8x over the past five years (from ~Rs 231 in July 2016 to ~Rs 884 levels in July 2021). We maintain our BUY rating on the stock due to visible growth in the medium to long term. Target Price and Valuation: We value Caplin at Rs 1135 i.e. 24x P/E on FY23E EPS," the brokerage has said.

Key triggers for future price performance:

• The company has developed its own brand with long-drawn ambitions and significant capex by succeeding in lesser-known CA markets and cracking the US generic pharma code of injectable.
• Portfolio consists of 20 ANDAs that have been filed, 15 of which have been approved. In addition, the company has 45+ goods in the works.
• The momentum of growth is expected to continue, owing to additional front-end expansion, a larger product basket, a shift in product mix, and the launch of own-brand products.

Buy Abbott India with 16% upside

Abbott India is one of the fastest-growing MNC pharma businesses on the stock exchange. It has consistently surpassed the industry in areas such as women's health, GI, metabolic, pain, and CNS, to name a few.

According to the brokerage, Abbott announced strong Q1FY22 performance. Sales increased 14.4% year on year to Rs 1217.8 crore. In Q1FY22, EBITDA was Rs 265 crore, up 13% year on year, with margins of 21.8 percent and PAT was 195.8 crore as a result of this (up 8.5 percent YoY).

Why buy the shares of Abbott?

"What should investors do? Abbott share price has grown by ~4x over the past five years (from ~Rs 4666 in July 2016 to ~Rs 19012 levels in July 2021). We maintain our BUY rating on the stock given the good Q1 performance and possible medium term traction. Target Price and Valuation: We value Abbott at Rs 20360 i.e. 42x P/E on FY23E EPS," the brokerage has said.

Key triggers for future price-performance:

• Abbott has a strong and long-term business model based on consistent growth, a debt-free balance sheet, favourable market dynamics such as doctor prescription stickiness, and decreased perceived risk concerns.
• Abbott's great track record in power brands and capacity to launch new products on a constant basis (+100 launches in the last ten years).

Disclaimer

Investing in stocks poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house, Motilal Oswal are not liable for any losses caused as a result of decisions based on the article. Investors should take care because the markets are at record highs, with the Nifty crossing the 16,000 points mark.