Due to many challenges in the pharma sector, the stocks associated with them have either been weak or their prices are stuck in the range. Nifty Farma index has weakened by about 15 percent in 1 year.
Best Pharma Stocks to Invest: During the first and second rounds of Kovid 19, pharma companies took full advantage of global opportunities. But after the end of this phase, there has been pressure on the pharma sector. Due to many challenges in the sector, the stocks associated with them have either been weak or their prices are stuck in the range. Nifty Farma index has weakened by about 15 percent in 1 year. Price cuts in the US, increased competition, tighter drug regulatory measures and reduced opportunities related to Kovid 19 have also affected the sector. However, some companies focusing on US based and domestic market are seeing earning potential. Some pharma stocks have the potential to give better returns going forward.
For US market focused companies
After the Kovid 19 epidemic, the financial year 2022 has been mixed for the pharmaceutical sector. During this 3 overchasing themes remained in focus. The first was a reduction in opportunities related to Kovid 19, the second was industry specific structural issues such as price erosion in the US, inventory delocking. Third, adverse global macro deflators such as higher inputs, freight and power costs, and supply chain challenges due to COVID-19 and geopolitical tensions.
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Earning potential remains in the pharmaceutical space such as CRAMS and branded domestic formulations. With a diversified geopolitical presence in the branded space and a portfolio of complex nature (specialty, biosimilar, injectable and complex generics with limited competition) select US based pharma companies are seen in a comfortable position.
For domestic market based companies
Talking about companies with domestic formulations, during the lockdown and limited number of patients in MR activities/clinics, most of the companies focused on opportunities related to covid. As soon as the situation started becoming normal, companies focused on normal activities through initiatives like digital drive, introduction of new products. Several companies, including Sun Pharma, the market leader among domestic focused companies, have expanded the MR recruitment drive to focus on the untapped therapy area.
What are risk factors
Talking about the risk factor first, there is a continuous decrease in prices in the US and more competition in the sector than expected. Higher input cost for second APIs and weak demand revival in generic APIs. Third negative outcome after plant visit of some companies from USFDA. Supply Chain Issues Despite Strong Orderbook For Fourth CRAMS
Top Picks of Brokerage Houses
Divi’s Lab
Rating: BUY
Target: Rs 4655
Return: 27%
Laurus Labs
Rating: BUY
Target: Rs 690
Returns: 47%
Sun Pharma
Rating: BUY
Target: Rs 1070
Return: 27%
Cipla
Rating: BUY
Target: Rs 1095
Return: 16%
(Disclaimer: Stock investment advice is given by the brokerage house. These are not the personal views of The Financial Express. Markets are risky, so take expert opinion before investing.)
