The last financial year saw pressure on the pharma sector throughout the year. Talking about the past year, the pharma index on BSE fell by 15 per cent, while the index on the Nifty fell 18 per cent. Experts, however, believe that concerns related to pharma sector are decreasing. In the past several products have been approved, while in this financial year, new products will come in the market for more than several years. At the same time, in the past few months, there is a good demand growth in domestic markets with domestic as well. In such a scenario, this fiscal turnaround can be seen in the underperformer sector for two years. Experts have advised to invest in Ajanta Pharma, Shilpa Medicare, Sunpharma and Netco Pharma.
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What is the right time for investment
Experts say that at the present time the market is volatile, in this case, the right time to invest in defensive stocks is the right time. It also includes Pharma Sector, which is at Atraiketer Valuation. During the last one year, stocks have seen a decline of 46%. Stocks of Lupine, Cadila, Cipla, Dr Reddy, Sun Pharma and Aurobindo Pharma have become cheaper during a year. Jagdish Thakkar, director of Fortune Fiscal, says that it is the right time to invest in defensive stocks from Pharma. Pharma sector is such that demand is always maintained. Although there has been some concern in the domestic and overseas markets in the past, there is pressure on the sector. But there is no concern about exports. Further sector is expected to recover.
According to a report by Growth Rating Agency Crisil, in FY19, the operating profit of the pharma sector can grow by 20-22% in the financial year, which will be the fastest after 2014. Revenue growth can be between 9-11 per cent during this period. According to the report, the challenge for the drug companies will be less this year than the previous year, while coming to this year many new product markets will also benefit. Crisil believes that this year the growth of drug companies in the global market will be sharp.
For the sector, some of the Concern
India Infoline (IIFL) pharma analyst Shrikant Akolkar says that growth in the domestic market is better. In such a case, for those companies which have high exposure in the Indian market, this year is going to be better. But the pressure on the margins of the US market is still showing. Pricing pressure in the US is still there. Competition has increased in generic drugs, so it will take some time for all the problems to be overcome. Although Indian companies which have a large base and their business modules are better, hopefully they will handle the pressure.
Brokerage House Arihant Capital has advised investment in Ajanta Pharma with a target of Rs 1500. According to the report, the focus of the company is the African market other than Asia. The company has good gains in the generic business in the African market. However, the company is now strengthening its base in the US market too. Dermatology has seen better growth in the domestic market.
Shilpa Medicare is a company that produces Active Pharmaceuticals Ingredient (APIs) of High Quality ShilpaMedicare. The company's focus is on Affordable Healthcare. The company's client base is strong. Recently, the company has been issued Establishment Inspection Report (EIR) on behalf of USFDO. Some of the company's products are also coming in the market soon. Shilpa Medicare had a profit of Rs 18.41 crore in the third quarter of the financial year. Brokerage house Motilal Oswal has given the target of 686 rupees for the stock.
Good news for Sun Pharma Sunfarma has been good news for the past year that it has got approval from USFDA for placental psoriasis medication. This drug was first made by US-based company Merck, which Sunfah later bought Worldwide Rights. Due to the availability of this medication, pressure on Sun Pharma will be reduced. This will help the company increase its market share in the US market. Some new products are in the pipeline, which will come in the market soon. Restarting has started after GST. The advantage of all of these will be ahead of the company. Brokerage house K.R. Choucse has set a target of Rs 633 for the stock.
Nitco Pharma FIIA Analyst of IIFL, Shrikant Akolkar has advised investment in NatKo Pharma with a target of Rs. 1006. NatKo Pharma is a fast growing pharma company of India. There are 5 manufacturing facilities across the country. At present, the company has 66 Indian and International Grant patents.
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