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Pharma in better health, these five stocks may be a good bet

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Pharma stocks were in the limelight on Wednesday after Sun Pharmaceutical Industries’ Halol facility got clearance from the US Food and Drug Administration, removing a key overhang on the stock.

The Nifty Pharma index ended up 0.9 per cent at 8,948.95 and is up 13 per cent from recent lows, reflecting the improving health of the sector.

While pricing pressures in the US continue, analysts believe one can look at select stocks in the mid and large-cap pharma space. SUN PHARMACEUTICALCMP (Rs ): 545.65 Last 1-year Return (%): 1.71 Buy/Hold/Sell: 16/13/12 Consensus Target Price (Rs): 523.94 Clearance of Halol unit by US FDA has fuelled gains in the stock.

Gaurav Dua, head of research at BNP Paribas owned-Sharekhan said a lot of negatives are now priced in.

“We upgraded Sun Pharma to buy from sell after Q4 result as many negatives are priced in.

There are still pricing pressures in the US but intensity of pressure is easing.

It also has a strong product pipeline,” said Dua. BIOCONCMP (Rs): 612.15 Last 1-year Return (%): 79.84 Buy/Hold/Sell: 10/3/6 Consensus Target Price (Rs ): 624.88 Approvals in the developed market and traction from emerging markets (EMs) are leading to positive sentiment in the stock.

“Biocon is getting approvals from the developed world and is also getting traction from EMs in biosimilars.

Syngene and biologics form about 50% of the turnover for FY18 and they will be the main drivers for Biocon,” said Siddhant Khandekar, analyst at ICICI Securities. ALKEM LABORATORIESCMP (Rs): 2,006.65 Last 1-year Return (%):6.22 Buy/Hold/Sell: 13/2/0 Consensus Target Price (Rs ): 2,209.38 Saurabh Kumar, Vice President at Motilal Oswal Financial Services said 15-20% return is easily possible from Alkem shares.

“It’s India business will continue to grow at mid-teens, margins because of profitable growth will go up and tax rate is also likely to come down in FY19,” said Kumar. AJANTA PHARMACMP (Rs): 1,036.35 Last 1 Year Return (%): -32.79 Buy/Hold/Sell: 6/3/3 Consensus Target Price (Rs ): 1,294.67 Kumar of Motilal Oswal favours the stock because of attractive valuations.

“The stock has corrected and now trades at 15 times forward earnings.

FY19 is likely to be muted du to challenges in US and emerging markets business but from FY20, growth will again become normal,” said Kumar. DIVI’S LABORATORIESCMP (Rs ): 1,039.80 Last 1-year Return (%): 61.43 Buy/Hold/Sell: 7/8/1 Consensus Target Price (Rs ): 1,162.07 Analysts said there is still money to be made in the stock.

“It is a niche specialised API player.

It had some regulatory issued which are behind us.

The stock has always traded at a premium because of better than industry growth,” said Dua of Sharekhan.




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