The market ended on a flat note for the second straight day on June 2 but for the month of May, the Sensex and the Nifty rose 6.5 percent each, while the pharma index added over 4 percent. Broking houses remain positive on the pharmaceutical stocks on the back of new product additions, cost reduction and capacity expansion.
Cipla | Brokerage: AnandRathi | Rating: Buy | LTP: Rs 954.55 | Target: Rs 1,100 | Upside: 15 percent. The broking house continues to remain positive on the company due to its strong product portfolio in the branded and unbranded generic franchise, emerging opportunities in consumer wellness franchise and future key launches in the US complex generics.
Aurobindo Pharma | Brokerage: Prabhudas Lilladher | Rating: Buy | LTP: Rs 966.30 | Target: Rs 1,139 | Upside: 18 percent. Given its strong focus on strengthening the performance in its global injectable business, the brokerage has increased assigned PE to 17x (earlier 15x) on FY23 EPS of Rs 66.9. 4QFY21 adjusted earnings beat estimates on the back of higher than expected revenues from acquired operations of Apotex in EU and higher realisations in API due to global supply constraints.
Glenmark Pharma | Brokerage: ICICI Direct | Rating: Buy | LTP: Rs 615 | Target: Rs 750 | Upside: 22 percent. Despite facing Covid-related challenges in various geographies in Q4, the company posted a stable topline, while EBITDA was higher mainly due to better gross margins. The brokerage said debt reduction, improvement in free cash flow and margins were key events to watch. As the legacy deflators seem waning with thoughtful steps and restructuring, it expects sustained investor interest in the theme.
Ipca Laboratories | Brokerage: Motilal Oswal | Rating: Buy | LTP: Rs 2,079.25 | Target: Rs 2,400 | Upside: 15 percent. The broking house reduce earnings estimate by 4%/2% for FY22/FY23, factoring in a) slower growth in the API business due to capacity constraints, b) lockdown-related impact in the branded export segment, and c) higher opex in the DF segment in FY22. However, it remains spositive on the company on the back of a) its outperformance in the industry in the DF/branded export segment, b) better profitability on improving manufacturing efficiency, and c) capacity expansion in the API segment.
Divis Laboratories | Brokerage: Motilal Oswal | Rating: Buy | LTP: Rs 4,214.10 | Target: Rs 4,850 | Upside: 15 percent. Motilal Oswal has raised FY22E/FY23E EPS estimates by 4% each to factor in: a) better business outlook in CS as well as the generics segment, and b) cost reduction on account of technology upgradation. The broking firm expects a 32% earnings CAGR over FY21-23E, led by increased business prospects from CS and generics, improved growth in nutraceuticals, new product additions over the near term, as well as around 180bp margin expansion on the process and productivity improvements.
