2 Pharma Stocks To Buy As Recommended By ICICI Direct For 12 Months

1. Cipla:

For the pharma major in therapeutic category with more than 50 dosage options, the brokerage firm has suggested a buy for a target price of Rs. 1085. The stock last trades at a price of Rs. 914.8, implying gains to the tune of 18.6 percent.

Key takeaways on the company

The company’s 40 percent revenues are accounted by branded formulations and enjoys leadership in areas including respiratory, anti-infective, cardiac,

gynaecology & gastro-intestinal.

21% export revenues garnered from the US followed by South Africa, Europe etc.

The company’s Q2fy22 numbers came in good with sales increasing YoY by almost 10 percent. EBITDA was at Rs. 1226.2 crore, up 4% YoY with margins at 22%. Likewise adjusted PAT has been at Rs. 711.4 crore (up 6.9% YoY)

Brokerage rationale for the buy on Cipla

The buy has been suggested as the brokerage continues to focus on the company’s core strength of followinga calibrated approach of focusing more on branded products and core therapies across the world

Target Price and Valuation: We value Cipla at Rs. 1085 i.e. 25x P/E on FY23E EPS +

Rs. 42 NPV for gRevlimid.

Key triggers for future price performance:

The company’s strategy of focusing four verticals viz. One-India, South Africa & EMs, US generics & specialty and lung leadership

• Across the board transformation with adoption of private model from tenderised model in exports market and more focus towards consumerisation of important TGx,

Rx products in Indian branded formulations

• The company is focusing on front-end model, especially for the US, along with a gradual shift from loss making HIV and other tenders to more

lucrative respiratory and other opportunities in the US and EU

• Expects significant momentum from H2FY23 onwards in the US on the back of possible approvals and launches of gRevlimid, gAdvair and gAbraxane

besides momentum gains from Albuterol portfolio

Note the buy on the stock has been given for 12 months

2. Sanofi India:

This is another pharma company for which the brokerage is bullish for gains up to 19.5 percent. The target price for the stock is Rs. 9800, while the last traded price is Rs. 8199.95.

After the company delivered its 3rd quarter results for the calendar year 2021 has come in good with good margins. The company’s sales increased 10 percent YoY while its EBITDA margins came in improved. Also PAT gained YoY by 15 percent.

ICICI Direct values Sanofi at Rs. 9800 i.e. 35x P/E on FY23E EPS

Key triggers for future price performance:

• Focus on leveraging high margin portfolio through divesture of lower margin product basket

• Strong balance sheet, good dividend payout track record and comfort on corporate governance

• Consistent performer despite four core brands being under price control

• Future launches from its global staple along with brand extensions

• Access to innovative molecules from parent like recently launched anti-diabetic drug Toujeo

Sanofi is into offering drugs in therapeutic areas such as cardiology, thrombosis, anti-infective, CNS, allergy, vitamins, minerals & supplements. Lantus, Allegra & Combiflam are in Top 100 pharmaceutical brands in India

Alternate Stock Idea: the brokerage apart from Sanofi has suggested a buy call on the stock of

Abbott that is the fastest growing

listed MNC pharma companies. It

has outperformed the industry on a consistent basis in women’s health, GI,

metabolic, pain, CNS among others.

Disclaimer:

Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article. This article is for educational purpose.