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Top 3 Stocks Suggested By BP Equitas: Rise API Sales And Steady Growth

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BP Equitas, a brokerage firm recommends three pharma stocks that are expected to show an upward trend in the near term. "The pharmaceutical companies under our coverage are expected to post a 6.9% (YoY) growth in earnings with a 10.1% (YoY) rise in the revenue base due to decent domestic traction. Lack of meaningful approvals increasing competition in the existing product portfolio leads to muted growth in the US market. However, a substantial ramp-up of albuterol for Lupin and Ilumya uptake to offset Absorica decline for Sun pharma would support the momentum in the US for both these players," BP Equitas commented.

 

Stock recommendations

Stock recommendations

Since the Covid pandemic, the pharma companies have grown sharply. With improvement in API sales and steady growth, the sector is booming now.

Company stockCurrent Market Price (CMP)Target Price (TP)
Fermenta Biotech230320
Granules India290393
Lupin789980


The firm added, "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."

Expectations of company performances: BP Equitas
 

Expectations of company performances: BP Equitas

Fermenta bio is expected to report revenue growth of 16.3% YoY to Rs. 1,157mn, led by improved traction in both Human and Animal VD3 business. Due to a favorable base and better product mix, the EBITDA margin can improve by 613bps to 16.4% from 10.2% in Q4FY21. We expect Adj PAT to witness a decline of 2.5% at Rs. 72mn.

Granules India is expected to report Rs. 10.06bn (+25.8% YoY) revenue, mainly driven by better realization supported by the price increase and partially due to new product introduction. We expect the EBITDA margin to recover on a sequential basis by 155bps to 19% from 17.4% in Q3FY22 on the back of taking a partial price increase (in line with RM cost increase) by re-negotiation with some of its customers and improving product mix.

We expect Lupin's revenues to grow by 10.7% YoY, owing to healthy growth in the domestic business. The US business to post low single-digit growth. The EBITDA margin is expected to decline by 531bps YoY to 13.5% due to increased input cost pressures and higher other expenses. However, Adj. PAT is expected to de-grow by 47.3% YoY to Rs. 2.95bn.

Disclaimer

Disclaimer

The above stock was picked from the brokerage report of HDFC Securities. 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.

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