Nifty Pharma hits record; GlaxoSmith, Aurobindo Pharma touch 52-week high
On Monday’s trading session, Nifty Pharma touched a record high at 15,950.80 level, up 0.9%. Among individual stocks, shares of Torrent Pharmaceuticals (up 0.58%), GlaxoSmithKline Pharmaceuticals (up 4.65%), Aurobindo Pharma (up 0.02%) touching 52-week high levels, while shares of Sanofi India (up 0.57%) , Cipla (down 0.12), Zydus Lifesciences (flat at 0.05%) hovering near its 52-week high levels.
According to technical analysts, there’s no major reason for Pharma sector to make record high, but since last couple of weeks this space have showed signs of outperformance breaking multiple month highs. Analysts expect this performance to continue and counter from this space likely to give trending moves, maintain positive bias and use dips to go longs.
“The Nifty Pharma index has resumed it’s uptrend recently and has now breached it’s previous highs indicating a continuation of the trend. Traders can look for stock specific buying opportunities from the sector,” advised an analyst.
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In its Q2FY24 review of the pharmaceutical industry, brokerage Axis Securities reported that the Pharma Coverage universe saw strong revenue growth of 14.3%/1.7% YoY/QoQ in Q2FY24 due to volume ramping, new launches (particularly gRevlimid, gSpiriva, and gPrezista), and stabilising pricing pressure in the US base business.
Brokerage Axis Securities in its Q2FY24 review on pharma sector, stated that in Q2FY24, the Pharma Coverage universe posted robust revenue growth of 14.3%/1.7% YoY/QoQ on account of volume rampup, new launches (especially gRevlimid, gSpiriva, gPrezista), and stabilising pricing pressure in the US base business.
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The domestic brokerage house reports that while prices stabilised and cost inflation normalised, the earnings before interest, taxes, depreciation, and amortisation (EBITDA) margin improved by a healthy 210bps/50bps YoY/QoQ. The recent launches of gRevlimid, gSpiriva, and gPrezista as well as the growing need for dependable suppliers in the face of medication shortages contributed to the strong US sales. The benefits of the current all-time high drug shortage are causing price erosion in the US to stabilise.
In the Pharma space, the brokerage’s top picks are Aurobindo Pharma, Cipla, and Lupin. The brokerage has a ‘buy’ call on the three stocks. The brokerage house has set the target price for Lupin at ₹1,325 and believes that there is a 10% chance of upside from the current market price (CMP) of ₹1,200.65. Cipla sees a potential gain of 8.32% from the set target price of ₹1,350 to the CMP of ₹1,246.30. The target price for Aurobindo Pharma is ₹1,080, and the brokerage believes there could be an 8% gain from the CMP of ₹999.80.
According to the brokerage, strong single-digit domestic growth is anticipated in FY24. Furthermore, the US market will continue to grow strongly due to the normalisation of base business prices, the continuous acceleration of gRevlimid, and the introduction of new products (gSpiriva, gPrezista). Due to supply limitations, the majority of business executives in the US have noted a sharp decline in price erosion, which is predicted to stay low for the remainder of FY24.
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“Margins will also improve as RM and freight costs normalise, US price erosion eases, and a better mix is achieved. However, USFDA inspections remain an overhang and price erosion in the US is expected to increase once supplies normalise.
Therefore, we continue to eye on companies that are focused on launching niche products in the US market and a strong product mix (Chronic Portfolio) in the Indian market. Lupin, Cipla, and Aurobindo are our top picks in the Pharma universe,” the brokerage said.
Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.
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Updated: 20 Nov 2023, 12:51 PM IST
