Pharma stocks to buy: The Indian pharmaceutical market declined in value 8.7 percent year-on-year in April-May ’22 due to a high covid-led base. Volumes were down 14.8 percent year-on-year over the same period. Ahead of results for the quarter ended June, brokerage firm ICICI Direct expects pharmaceutical and healthcare companies to report moderate growth for the quarter ended June 22, reflecting a high base in the domestic market. In addition, higher raw material and freight costs, as well as price pressure in the US operations due to high channel inventory, continue to weigh on overall performance.
It further said, “As a result, we expect the covered companies EBITDA margin to decline 300 bps year-over-year to 19.2 percent. The health segment (hospitals, diagnostics, and devices) will also report weak YoY performance, primarily due to from a high base, which was driven by covid-led revenues Overall, we expect our coverage universe to report only 1 percent year-over-year revenue growth and a 13.3 percent/15.3 percent decline in EBITDA/PAT, respectively .”
Growth in the quarter that becomes company specific
Global brokerage and research firm BNP Paribas expects its Indian pharma and health insurance universe to report total revenue growth of c6 percent YoY and c3 percent YoY in 1QFY23. It expects revenue growth during the quarter to be company specific, with the domestic formulation segment growing a total of c1 percent year-over-year as a result of the high base of Covid-related sales in the Indian operations for some companies and U.S. sales only improves c2 percent quarter-over-quarter or QoQ (+6 percent year-over-year), even as new launches partially offset the price erosion.
Key factors to watch out for
Speaking of the key factors to look out for, ICICI Direct said management commentary should be wary of i) raw material prices and logistics issues; ii) updates on USFDA inspection; iii) US channel inventory and traction in complex/specialty products; iv) growth prospects in India; v) growth in emerging markets with demand prospects; and vi) growth and competition in devices, diagnostics and hospitals.
The note pointed to the key risks and said: “Negative outcome of USFDA inspections, currency volatility and inclusion of more products under NLEM in India.”
Top Pharma Stocks to Buy
ICICI Direct gave a ‘BUY’ rating to Abbott India, Alkem, Apollo Hospital, Aster DM, Aurobindo, Dr Lal Pathlabs, Dr Reddy’s, Fortis Healthcare, Glenmark, Healthcare Global, JB Chemicals, Metropolis, Natco.
BNP Paribas shares its top stock selection and says it continues to favor Sun Pharma and Aurobindo Pharma in the pharmaceutical sector and Dr Lal Path Labs and Fortis Healthcare in the healthcare sector.
It has Buy ratings on pharma stocks Sun Pharma, Aurobindo Pharma, Apollo Hospitals, Divi’s Laboratories, Metropolis Healthcare and Torrent Pharma, while BNP Paribas holds on Cipla and Zydus Lifesciences.
The expert opinions and investment tips in this News18.com report are their own and not the website’s or its management. Users are advised to contact certified experts before making any investment decisions.
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