Top 2 Pharma Stocks Suggestions, Gradual Pick Up In API Company Sales: BP Equitas

The pharma sector has given significant returns to the investors in the short term, during the pandemic. Increased API sales and people's awareness of hygiene have driven this growth. "Domestic formulations are expected to grow at the higher single-digit to midteen due to continued traction in acute therapies and sustained pick up in chronic pieces. Cost pressures in the form of higher freight costs, marketing spends and raw material cost increases are likely to dent margin, which would slow down the earnings growth." BP Equitas commented.

Stock recommendations

The brokerage firm has recommended these two below-mentioned stocks for investment.

Company stock	Current Market Price (CMP)	Target Price (TP)
SeQuent scientific	136	170
Sun Pharma	925	1080

The firm added, "We expect a gradual pick up in API company sales due to inventory drying at the customer end. Overall, our pharmaceutical coverage would post Revenue/EBITDA/PAT growth of 10.1%/6.7%/ 6.9% YoY in Q4FY22. We expect the EBITDA margin of our coverage universe to decline by 67bps YoY, led by the increase in raw material cost and higher other expenses."

Expectations of company performances: BP Equitas

Sequent Scientific to post revenue growth of 15.6% on the back of improvement in the API sales and steady growth in the formulation business. EBITDA margin to decrease by 127bps mainly due to higher Raw martial, logistics, and employee costs (due to ESOP). The company is expected to post a Net profit of Rs. 216mn compared to a profit of Rs. 206mn in Q4FY21.

Sun Pharma's revenues are likely to grow by 14.9% YoY at Rs. 96.8bn, partially driven by the Specialty portfolio led by the Winlevi launch good ramp up in Cequa and Ilumya. We expect domestic formulations to report growth of 12% YoY. The company's EBITDA margin improved by 237bps YoY to 26.8% from 24.4% due to a better product mix. Subsequently, adjusted net profit is expected to expand by 29.2% to Rs. 17.6bn.

Disclaimer

The above stock was picked from the brokerage report. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.