Pharma stocks have been shining bright so far this year and by the looks of that glitter is not looking to fade away anytime soon. A slew of measures have been announced that could help India’s pharmaceutical industry emerge as a global player. Domestic pharma players have also set their eyes on the API segment where China has been a dominant player, even a small piece of that cake could help domestic pharma players. Analysts are upbeat on the sector and picking their top bets among some of the leading names in the space. Here are some of the top pharma stocks that analysts recommend.
This pharma firm is on the radar of brokerage firms Motilal Oswal and Anand Rathi. “We are positive on DIVI given favorable demand for its APIs, margin enhancement owing to an increase in the in-house manufacturing of intermediates, and additional revenue from new capex,” Motilal Oswal said. Divi’s is being eyed as a strong play in the API space. Currently the stock is trading at 38.7x FY22E EPS. “As global players are looking to reduce dependency on China and preferring India, companies like Divi’s remain well placed to capitalize on such opportunity,” said Anand Rathi. While Motilal Oswal has a target price of Rs 3,520 per share, analysts at Anand Rathi have a higher target of Rs 3,730 apiece translating to an upside of 10%.
Alembic Pharma manufactures branded formulations, international generics and APIs. HDFC Securities as well Yes Securities recommend the stock. The firm has a 43% revenue contribution from the US market, other key geographies include Europe, Australia, Canada, and South Africa among others. “Company has invested heavily over the last three years across R&D and manufacturing, which is likely to show better results in the US market from H1FY22,” said HDFC Securities. The domestic market is also expected to rebound soon. “In the current disruptive environment, we reckon stocks with high certainty of earnings would command a disproportionate investor interest and wide premium to sector averages,” said Yes Securities. Target price set up HDFC Securities is Rs 1,148 per share while Yes Securities sees 22% upside with a target of Rs 1,180 apiece.
SBICAP Securities has AstraZeneca as one of their top Diwali picks. A debt-free company, AstraZeneca Pharma has been generating positive cash flow from operations for the last five years. AstraZeneca has a strong portfolio of oral antidiabetic products with presence in 2 key drug classes. This strong presence in the oral antidiabetic products is being seen as a positive by SBICAP. “. At current price, the stock is trading at 132.4x/117.1x of its FY21E/FY22E earnings which gives an attractive investing opportunity,” they said. With a target price of Rs 5,153 per share the brokerage house is expecting a 20% upside on the stock.
With over 1500 products and presence in more than 80 markets, Cipla is a leading pharmaceutical company. Formulation exports comprise nearly 54% of its previous year revenues. Cipla is focusing on developed markets and some key launches in that space will help the company going forward. “We continue to focus on the management’s long-drawn strategy of targeting four verticals viz. One-India, South Africa & EMs, US generics & specialty and lung leadership,” said ICICI Direct while pinning a target price of Rs 900 on the stock, translating to a 16% upside.
Hikal is a Leading Sustainable Technology driven company serving the Crop Protection & Pharmaceutical Industries. Hikal’s management envisages to expand horizontally and gain market share in its existing businesses while continuing to add new innovator & biotech customers and expand its API facilities, according to Anand Rathi. “The company sees several tailwinds including additional capacity & new product pipeline to achieve 10% revenue growth along with higher margins,” they added. The brokerage firm sees a 26% upside with a target price of Rs 211 per share.