Aurobindo Pharma, Sun Pharma preferred picks: Joshi

Mayuresh Joshi of Angel Broking told CNBC-TV18, "I am very selective in the pharma space. On account of the higher valuations that they are now deriving and there is no denying the fact that the earnings growth will be quite good considering the kind of rupee depreciation that you have seen and again the kind of strong Abbreviated New Drug Application (ANDA) pipeline that a lot of these pharma companies have got. They definitely hold their earnings potential in good stead but having said that if you look at the trailing valuations, Sun Pharma and Aurobindo Pharma are something that we still believe have some headroom left in terms of price action. Clearly for Sun Pharma FY'16 will be a washout here and what probably happens beyond that with the resolutions in Halol, EBITDA margins probably getting back to normal, RoEs getting back to normal and that will hold Sun Pharma in good stead from an FY17 perspective.""For Aurobindo Pharma, our take is that the injectibles business is a huge business. The management themselves expect 18-20 approvals to come through over the next couple of years. Higher margins business and the kind of acquisitions that they have done specifically with activists in that role should help them in posting a topline over the next two years close to Rs 16,000-16,500 crore odd," he said."Clearly Aurobindo Pharma and Sun Pharma remain our preferred picks. Lupin has got decent sheen in terms of price hikes take recently. So, you will see some amount of expansion happening on the EBITDA front. Similarly for Dr Reddy's Labs we had a strong buy rating at lower levels. But it has crossed our target price. We will wait for the numbers to come through before we rerate the stock."