Pharma Stocks to Buy: The Indian pharma market declined 8.7 per cent YoY in value terms during Apr-May’22 owing to a high covid-led base. The volumes declined 14.8 per cent YoY during the same period. Ahead of results for the quarter ended June, brokerage firm ICICI Direct expects the pharma companies and healthcare companies to report subdued growth during the quarter ended Jun’22 due to a high base in the domestic market. Besides, higher raw material and freight costs, as well as pricing pressures in US business due to high channel inventory, continue to drag overall performance.
It further said that “Hence, we expect the EBITDA margin of the covered companies to decline 300bps YoY to 19.2 per cent. The healthcare segment (hospitals, diagnostics, and devices) will also report subdued YoY performance mainly due to a high base, which was driven by covid-led revenue. Overall, we expect our coverage universe to report a mere 1 per cent YoY revenue growth and 13.3 per cent/15.3 per cent decline in EBITDA/PAT respectively.”
Growth During The Quarter to be Company Specific
Global brokerage and research firm BNP Paribas projects its Indian pharma and healthcare coverage universe to report aggregate c6 per cent year-on-year (YoY) revenue growth and c3 per cent year-on-year earnings decline in 1QFY23. It expects revenue growth during the quarter to be company-specific, with the domestic formulation segment growing aggregate c1 per cent year-on-year due to the high base of Covid-related sales in the India business for some companies and US sales improving only c2 per cent quarter-on-quarter or QoQ (+6 per cent year-on-year) even as new launches partially offset the price erosion.
Key Factors to Watch Out
Speaking about the key factors one has to watch out for, ICICI Direct said that in management commentary one has to watch out for i) Raw material pricing and logistical issues; ii) updates on USFDA inspection; iii) channel inventory in the US and traction in complex/specialty products; iv) growth outlook in India; v) growth in emerging markets with demand outlook; and vi) growth and competition in devices, diagnostics, and hospitals.
Pointing out the key risks, the note said: “Adverse 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.
Sharing its top stock picks, BNP Paribas said it continues to prefer Sun Pharma and Aurobindo Pharma in the pharma space and Dr Lal Path Labs and Fortis Healthcare in healthcare.
It has Buy ratings on pharma stocks Sun Pharma, Aurobindo Pharma, Apollo Hospitals, Divi’s Laboratories, Metropolis Healthcare, and Torrent Pharma whereas BNP Paribas has Hold stance on Cipla and Zydus Lifesciences.
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