Pharma stocks can see an upside of 15-18% this year in line with earnings momentum on the back of strong prospects expected in the US and India markets.
According to analysts, most pharma stocks will outperform as growth in the sector is intact.
Abhishek Sharma, pharma analyst, IIFL, said, “The pharma pack looks good this year because of strong growth prospects in the US and India markets. Some of the large-caps and mid-caps have reported upside in stock prices on the back of strong growth in the US, and we anticipate that kind of growth this year.”
Sarabjit Kour Nangra, VP – research, pharma, Angel Broking, said, “This year many companies have reported good developments which indicated that the sector will continue to do fairly well. And the numbers of most of the companies are improving, sequentially and year-on-year basis too. So the growth momentum will be maintained.”
Analysts feel there is a lot expected from the pharma sector this year.
“Next year, we will see the Sun-Ranbaxy entity coming together, and how that synergy plays out in the market will be something to watch out for. Among the stocks, Dr Reddy's Laboratories and Lupin would benefit from strong product pipeline in the US. Dr Reddy's has a strong pipeline for complex products, many of which have come this quarter and we expect that kind of a momentum to continue next year. Lupin again has a strong pipeline of first-to-file, some of which will be monetised next year,” an analyst said.
Big launches have been lined up by Torrent Pharmaceuticals, and Cadila Healthcare has a huge product pipeline. For Glenmark, apart from its US approvals, analysts will keenly watch for the out-licensing efforts on their pain molecules and any progress on vatelizumab if that gets reported by its partner Genzyme, she said.
While share prices of Lupin and Cipla has increased by over 55% last year. Dr Reddy's, Sun Pharma, Ranbaxy and Glenmark stocks grew between 25% and 45%. Shares of Cadila Healthcare almost doubled during the one-year period while Torrent Pharma, Aurobindo and Wockhardt grew over 100%.
“There is a re-rating on Aurobindo this year. It is no longer a mid-cap and has become a large-cap stock because the numbers it has given on topline and bottomline along with the couple of acquisitions it has done recently has further increased its size. In the case of Torrent, the domestic portfolio is decent. Actually, the whole pharma set has moved up, and whatever significant set of deviations from valuation were there that has corrected. Most of pharma stocks have given that kind of rise. So from this year they can give returns in line with earnings momentum with decent 15-18%,” said Nangra.
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