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May 07, 2013 04:26 PM IST | Source: CNBC-TV18

Bullish on Glenmark, Ipca Labs among midcaps: Antique

In an interview to CNBC-TV18, Anmol Ganjoo of Antique Broking share outlook on the pharmaceutical space and trading strategies for various stocks in the sector. He is bullish on Glenmark and Ipca laboratories from the midcap pharma space.

In an interview to CNBC-TV18, Anmol Ganjoo of Antique Broking share outlook on the pharmaceutical space and trading strategies for various stocks in the sector. He is bullish on Glenmark and Ipca laboratories from the midcap pharma space.

Below is the verbatim transcript of Anmol Ganjoo’s interview on CNBC-TV18

Q: What are you expecting from Glenmark? Is it going to be another steady set of numbers?

A: Glenmark should continue to post strong numbers especially after the last quarter which was a massive beat on almost all the matrix. We do expect that performance trend to continue. However, while the numbers might continue to look very strong on a year-on-year (Y-o-Y) basis, the prognosis is not as good due to high brace.

Last quarter, you saw India growing at 30 percent. Rest of the world market is growing close to 40 percent and that’s not a performance which is likely to be repeated. On the whole, a good set of numbers. Management commentary on a lot of key catalysts will be very important and we would watch out for that.

Q: Our poll threw up an expectation of Rs 1,200 crore for revenue which would be a 16 percent growth, Rs 1,240 crore to be precise. Profit at Rs 150 crore which would be flat, are you expecting any surprises?

A: We are not expecting surprises on the numbers front because this comes on the back of very strong numbers that were posted last quarter. The numbers last quarter were up 60 percent ex of one offs like licensing income. So even if that performance is held steady, there is room for re-rating of the stock. If the earnings trajectory holds steady, there will be material upgrades as far as stock performance expectations are concerned.

Q: What about Ranbaxy? How do you see that stock panning out?

A: Ranbaxy had a lot of trading moves in the last 8-12 months. It is difficult to be constructive on the name until we have significant visibility on the base business. Base business since last 8-10 quarters has been very lacklustre. If we do not see any material improvement in core business, earnings before interest, taxes, depreciation, and amortization (EBITDA) trends, it will be difficult to make a strong case for Ranbaxy. This quarter, you do expect Absorbica traction in the US. Last quarter we had spill over of Actos.

You will continue to see these one-offs but to take a medium to long term constructive view on the stock we need to be convinced about the base business, EBITDA trajectory and traction in the domestic business. We haven’t seen enough evidence of that, so that’s what is important in the case of Ranbaxy.

Q: Lupin has been one of the outperformers with close to 17 percent gain on a year-to-date basis, it has outperformed the pharmaceutical space as well. Today as well, it is higher by 2.5 percent, do you expect more upside from these levels? It is already trading above Rs 700 mark.

A: Lupin has a lot going in its favour. As the data from the US comes out, you have seen significant traction in Tricor. The company continues to hold a 34-35 percent market share in that important drug. For the full year, we expect a contribution of around Rs 5.50-6 clearly from this product. That’s driving near term expectation.


If you were to take a medium to long term view on the stock, you have to remember that this is one of the best pipelines in the US. There is considerable traction as far as oral contraceptives are concerned. Domestic market continues to hold steady. The Suprax scare that we saw a couple of weeks’ back, even that doesn’t seem to materialise on the ground because as far as the prescription data from the US is concerned, it shows that there are no signs of slowing down.

The stock has run up and is trading close to our price target, but as the roll forward for FY15 numbers happen, and we will listen to the management commentary tomorrow, there could be a case for Lupin given the strength of the pipeline to continue to hold it and buy it at current levels. But just because it has performed, I don’t think is a case enough for taking money off the table.

Q: What about Sun Pharma?

A: Sun Pharma is also in similar trajectory because in the last three-four quarters, Sun Pharma looked extremely expensive. You had one of the earnings trigger pan out which has made the stock look cheaper on a retrospective basis.

The stock currently trades at 23 times but you have to remember that given the richness of the pipeline especially in the US, you cannot rule out that another drug from the stable of either URL Pharma or niche product launches comes and gives an 8-10 percent earnings upgrade to FY14 and FY15 numbers. So that has been pretty much the Sun Pharma story so far. Therefore, we continue to bag, its rich valuations not withstanding.

Q: Midcap pharma was very active on Monday. AstraZeneca or Shasun Pharmaceutical, all of them were fairly active. Do you like any thing in the midcap pharmaceutical bunch?

A: We continue to like Ipca Laboratories. Glenmark is also something we classify as midcap pharma. You have to remember that this is a classic sectoral rally in which once the valuation room in the frontliners seizes to exist, people try to move down the capital and that is what’s happening in pharma space as well.

The three big things going for the Indian pharma space at this point of time or in last 12 months have been (1) currency, (2) the domestic growth holding notwithstanding the general slowdown and (3) some of the niche launches in the US. All these three themes hold well for midcap pharma as well. So it is difficult to say that as these favourable tailwinds help the big pharma, it will not be the case for midcap and smallcap pharma. You will see some spill over of stock performance or earning performance in smaller space as well. Given their run up in the valuations, it is important to be careful what you continue to back. Glenmark and Ipca is something that we like.

Q: Ipca is such an up, up and away kind of rally. It is an extraordinary rally. Would you buy it even at current levels of Rs 550?

A: Our target price is still around 14 percent higher from here and that is predicated on the fact that there is going to be considerate traction in the malarial franchise. There is some improvement as far as the cost structure of the company is concerned. It’s a multiyear story and if there is one company that can make the transition from midcaps to the frontline space, Ipca is a strong candidate for that and therefore, we continue to back Ipca at current levels.

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