2 Pharma Stocks for Long Term Investing

  • Stock Market Analysis

The Indian pharmaceutical sector has been running on elevated tracks. But is it continuing to do? This question comes to mind, especially after the 10% decline in Dr. Reddy’s Laboratories Ltd (NS: REDY ) stock on July 28. In a year, the Nifty Pharma index rallied 34% against 42% gains in Nifty 50 . On a six-month comparison, Nifty Pharma index delivered 18.5% returns compared to Nifty 50's 15.6%. In the last three months, Nifty 50's yield was 0.6% higher than Nifty Pharma index's 7.1% returns. In a month, the sectoral index gained 0.81% against Nifty 50's 0.26% gains. After screening the pharmaceutical stocks' universe, we discovered two long-term bets.

Sun Pharmaceutical Industries Ltd. (NS: SUN )

Sun Pharmaceutical Industries manufactures and markets drugs and medicines for domestic and overseas distribution. The company's pharmaceutical portfolio consists of medicines for gastroenterology, cardiology, neurology, diabetes, and psychiatry. According to Evaluate Pharma Estimates for 12 months ended December 2020, Sun pharma is the world's fourth-largest specialty generic company. With 44 manufacturing sites worldwide, the company has a presence in more than 100 countries across branded and generic markets. It has R&D and manufacturing capabilities across dosage forms like injectables, sprays, ointments, creams, liquids, tablets, and capsules. The increasing contribution of specialty and complex products focus on key markets, not-so-stiff pricing pressure in the US markets, strategic acquisitions along with future investments directed towards differentiated products should drive Sun Pharma (NS: SUN )'s revenue in the future.

Sun Pharma's consolidated total operating revenue stood at Rs 9,718.7 crore, up 28.1% year-on-year in Q1FY2022 from Rs 7585.2 crore in Q1FY2021. From a net loss of Rs 1,655.6 crore in Q1FY2021, the company reported a net profit of Rs 1444.1 crore in the first quarter of fiscal 2022. The exceptional items of Q1FY2021 included the multi-million dollar charge. Sun's subsidiary in the US resolved all matters globally in connection with the multi-year investigations by the Department of Justice in the US generic pharmaceutical industry. This worldwide settlement augurs well for the company's bottom-line growth in the future.

The company's 15-year revenue CAGR remained an impressive 22%. Its EBITDA CAGR during the same period was 21%, whereas the adjusted net profit CAGR was 17%. Its EBITDA margin, return on equity, and return on capital employed displayed a rising trend in the last five years ending FY2021. Although promoters' holding remained unchanged in June 2021 quarter, in contrast to FIIs, the MFs and DIIs marginally raised their stake in Sun Pharma during the same period. Sun Pharma jumped 45.5% in a year, 31.1% in six months, 13% in a month, 10.8% in the last five days, and 10% on July 30, triggering an upper circuit. Investors—note that the scrip is part of Nifty 50 and the F&O segment. Despite this, it triggered an upper circuit today. The sun has risen on the Indian pharma horizon.

Laurus Labs Ltd (NS: LAUL )

Founded in 2005 and headquartered in Hyderabad, Laurus Labs Limited develops and manufactures active pharmaceutical ingredients (or APIs) for antiretrovirals and hepatitis C therapeutic areas. The company is banking on the growth opportunities in Fixed Dosage Formulations (or FDF) manufacturing in major European and North American markets. It is also scouting for scaling growth via contract development and manufacturing. Better prospects in the Synthesis vertical, capacity build-up in the non-ARV division, debottlenecking exercise in FDF should expedite Laurus Lab's revenue growth in FY2022 and ahead.

Laurus Labs reported net revenue of Rs 1220.6 crore on a standalone basis, up 25.8% year-on-year in Q1FY2022 from Rs 970 crore in Q1FY2021. Its EBITDA jumped 36.7% year-on-year during the same period to Rs 370.6 crore from Rs 271.1 crore in Q1FY2021. The company's FY2017-21 consolidated revenue CAGR stood at 25.7%, while profit after tax CAGR was an impressive 50.8%. The company's promoters freed most of the pledged shares by selling their stake in 2021. Notably, FIIs/FPIs, MFs, and DIIs have marginally increased theirs in June 2021 quarter. No wonder the share returned 247% in a year and 84.9% in six months. The stock was up 7% on July 30 and trading at a 7.2% discount to its 52-week high of Rs 697.8.

Drop an image here or Supported formats: *.jpg, *.png, *.gif up to 5mb

Error: File type not supported

Drop an image here or

100
  • Vinayak Mhetre @Vinayak Mhetre
    Also Biocon and Dr reddy seems good. its options are very strong and gaining inverted hammers which are a great positive signals.
    Like 0
  • deepakcoach sharma @deepakcoach sharma
    Every analyst become smarter after appreciation of stock, kindly pick under owned and under priced stocks
    Like 12
    • Venkat shanmugam @Venkat shanmugam
      {{uid:}}YES! tHEY should tell correct time of Value to enter the stock & then speculate. Past performance is not he guarantee of future performance.
      Like 1
    • Velmurugan Annadurai @Velmurugan Annadurai
      YES
      Like 0
    • Drop an image here or Supported formats: *.jpg, *.png, *.gif up to 5mb

      Error: File type not supported

      Drop an image here or

      100
  • Dilip Gomes @Dilip Gomes
    Yes.
    Like 0
  • Royston Dsouza @Royston Dsouza
    Never buy sun pharma. It wont gove you returns more than savings bank
    Like 9
    • Mahendra Puvar @Mahendra Puvar
      It gave 10% return on 30th July 2021
      Like 1
    • Drop an image here or Supported formats: *.jpg, *.png, *.gif up to 5mb

      Error: File type not supported

      Drop an image here or

      100
  • mothilal naik @mothilal naik
    Sun pharma is good selection
    Like 1
  • Ajay Singh @Ajay Singh
    Very Useful
    Like 1

Related Articles