Pharma stocks to buy, add, hold, as per ICICI Securities: Things to watch in Q3

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Domestic brokerage and research firm ICICI Securities expects pharma and healthcare companies under its coverage to report modest growth in Q3FY23, supported by healthy domestic performance. Raw material and freight costs are expected to taper down slightly but still remain at elevated levels viz-a-viz pre-covid level, it said in a note on the pharma sector earnings’ preview. 

Pricing pressures have started slowing down in the US with the expectation of normalisation in coming months. The brokerage house expects EBITDA margin of its coverage pharma companies to decline by 50 bps from the year ago quarter to 20.9%.

“Healthcare segment (hospitals, diagnostics and devices) is likely to report healthy YoY performance driven by recovery in base business. Diagnostic companies are likely to witness a sequential decline with Q3 being a historically weak quarter for most companies. Overall, we expect our coverage universe players to report 7.7%/5.3%/ YoY revenue/EBITDA growth and 7.2% decline in PAT, respectively,” the note stated.

ICICI Securities’ pharma stocks recommendations to Buy, Add and Hold –

Abbott India (HOLD)

Alembic Pharma (ADD)

Alkem (BUY)

Apollo Hospital (ADD)

Aster DM (ADD)

Aurobindo (ADD)

Biocon (BUY)

Cipla (HOLD)

Divi’s Labs (ADD)

Dr Lal Pathlabs (ADD)

Dr Reddy’s (BUY)

Fortis Healthcare (ADD)

Glenmark (BUY)

GSK Pharma (ADD)

Healthcare Global (BUY)

JB Chemicals (ADD)

Jubilant Pharmova (BUY)

KIMS Hospital (BUY)

Lupin (REDUCE)

Metropolis (BUY)

Natco (BUY)

Pfizer (BUY)

Piramal Pharma (BUY)

Poly Medicure (HOLD)

Sanofi India (BUY)

Shilpa Medicare (HOLD)

Solara Active (BUY)

Strides Pharma Science (BUY)

Sun Pharma (HOLD)

Tarsons (HOLD)

Thyrocare (BUY)

Torrent Pharma (BUY)

Vijaya Diagnostic (BUY)

Key factors to watch out in management commentary of pharma companies: Raw material pricing; update on US FDA inspection; channel inventory in the US and traction in complex/specialty products; growth outlook in India; growth in emerging markets with demand outlook; and growth and competition in devices, diagnostics and hospitals.

Key risks, as per ICICI Securities, could be adverse outcome of US FDA inspections, currency volatility and inclusion of more products under NLEM in India.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.


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