NEW DELHI: Pharma stocks are back in focus, as a second wave of Covid pandemic ravages India. Investors looking for safer bets and craving for returns in an uncertain market are taking shelter in these defensive bets.
But money-making options appear to be getting limited in that space as well, though analysts feel there could be new opportunities in niche in-demand segments like hospitals, vaccine makers and select others.
Big Bull Rakesh Jhunjhunwala’s largest pharma bet,
, has been one of the underperformers amid the pharma bull market. The ace investor holds 7,245,605 shares, or 1.6 per cent stake, in the company. That stake is valued at Rs 855 crore, making it his third largest bet in the portfolio after Titan Company and Tata Motors.
Lupin reported an 18 per cent increase in the March quarter’s consolidated net profit at Rs 460 crore, driven by robust sales across domestic and international markets. The Mumbai-based company had reported Rs 390 crore profit for the January-March quarter of 2019-20.
Lupin’s March quarter earnings failed to enthuse analysts. Many have given mixed reviews for the drugmaker, saying everything is not in the pink of health. Some have even downgraded the stock.
“Lupin gave a guidance for double-digit growth in the US on FY21’s low base as sales of antibiotics and anti‐infectives got affected amid a drop in flu‐related sales. Thanks to the slow rampup and Q4 disappointment, we factor in 15 per cent growth in FY22 US revenues in H2 of FY22,” domestic brokerage Yes Securities said in a report.
“Domestic sales are likely to rebound on a weak base of FY21, and we expect lower research & development to support margins. We still value stock at 20 times FY23 EPS and arrive at a price target of Rs1,000. Near-term muted expectation for H1 of FY22 may result in a better entry point in the stock,” the brokerage said.
It gave a ‘sell’ rating with a price target of Rs 1,000.
The companys total income from operations declined to Rs 3,783 crore during the quarter compared with Rs 3,846 crore reported for the corresponding period of FY20.
Lupin shares have surged 25 per cent this calendar to trade at Rs 1,246 on May 11. The counter cooled off 5 per cent from the peak to trade at Rs 1,182 on Monday. However, it is trading at half its all-time peak hit in October 2015.
ICICI Securities in a report said Lupin’s Q4FY21 performance was in line with expectations across parameters. Yet, the brokerage has downgraded it to ‘reduce from ‘add, as it believes that recent rally in the stock price has factored in a likely margin improvement.
“A recovery in India growth and a gradual ramp-up in US sales should help revenue growth and margin improvement, which should benefit from cost control,” the brokerage said. “We raise earnings estimates for Lupin by 3-4.per cent to factor in cost control and lower tax rate,” it said.
For financial year 2020-21, the drugmaker posted a consolidated net profit of Rs 1,216 crore against a net loss of Rs 269 crore report for 2019-20. Total income from operations for FY21 stood at Rs 15,163 crore against Rs 15,375 crore in FY20.
HDFC Securities has downgraded the stock to ‘add’ with a price target of Rs 1,220. The brokerage has a positive views on the company’s ability to execute and monetise pipeline, but has cited delay in key approvals, resolution of plants and lower-than-expected margin expansion as major risks for the pharma manufacturer.
The Lupin stock surged 45 per cent in last one year, but underperformed the 52 per cent rise in NSE Pharma Index and 60 per cent gain in Nifty50 during this period.
However, a few brokerages are still positive on the stock. Axis Capital has maintained an ‘add rating on it with a revised price target of Rs 1,280, up from Rs 1,120. “We expect US sales to recover from FY22 led by a rampup in inhaler pipeline and other launches,” the brokerage said.
The company announced a dividend of Rs 6.5 per equity share of the face value of Rs 2 each aggregating to Rs 295 crore for the year.
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