Even immediately after pharma stocks witnessed a huge bull run in 2020 and valuations appear fairly wealthy at this juncture, worldwide investment bank HSBC expects the momentum to continue. “After four difficult years, the India pharma sector rallied in 2020, and we expect the benign operating environment to lead to another good year,” a current report by HSBC stated. In 2020, the Nifty pharma index soared 58% as investors latched on to defensive bets to cruise via the pandemic. In 2021, HSBC sees export demand, benign regulatory outlook, and tailwinds from coronavirus vaccines to aid domestic pharma stocks.
Aurobindo Pharmaceuticals
Target value: Rs 1,200
Currently, the shares of Aurobindo Pharma are trading at Rs 915 apiece, translating to a 31% upside. A big item portfolio, extremely integrated manufacturing base, possible advantages from supplying coronavirus vaccine are anticipated to be some of the positives for Aurobindo Pharma in 2021. “We believe the company remains on track to achieve its target of no long-term debt in the next two years; proceeds from the Natrol deal and internal accruals should support its capex and R&D programmes without any additional debt,” the report stated. At the present rolling 1-year forward PE of 15.6x, Aurobindo is trading at a 16% premium to its 3-year typical PE.
Biocon
Target value: Rs 560
Analysts at HSBC stated the like Biocon for its favourable market place positioning in biosimilars in the US and the EU. Along with biosimilars, the outlook for study services enterprise and generics also remains powerful. Significant market place share obtain with biosimilars, possible receipt of ‘interchangeable’ designation for Semglee from the FDA, and approval for bevacizumab are some catalysts to watch out for Biocon in 2021. The stock has tanked 9% on today on weaker than anticipated earnings, which may perhaps pave the way for an appealing entry point for investors.
Dr Reddy’s Lab
Target value: Rs 6,000
Dr Reddy’s is working to boost its sales in the United States and India by 50% in the next 2-3 years time. “We believe its consistent focus on strategic launches, portfolio synergies and cost optimisation should help it to sustain earnings growth. In the near term, Dr Reddy’s may see significant benefits from supplying COVID-19 vaccines,” the report stated. Dr Reddy’s Lab is in agreement to provide one hundred million Sputnik V covid-19 vaccine. Currently, the stock is trade at Rs 5,021 per share, translating to 19% upside possible.
Divi’s Lab
Target value: Rs 4,260
“The improved business on the back of progress in capex projects and the favourable industry tailwind – customer preferences for diversified sourcing, including the “China+1” approach – must sustain the company’s momentum,” HSBC stated. Divi’s Lab is trading at rolling 1-year forward PE of 43.3x, nevertheless, analysts think an enhanced enterprise outlook justifies the valuations. From present levels, the stock wants to surge 19% to attain the target value.