Midcap pharma stocks could be a worthwhile bet
Uncertainty in the pharma sector may have led brokerages to be cautious on their outlook on companies but some emerging formulation players may have begun to look interesting according to some brokerages.
HDFC Securities in a note said it met with the management of some emerging formulations players such as Granules India and Laurus Labs and added that the outlook may be healthy for both companies. “Since growth challenges and regulatory issues bedevil many large-caps, we believe mid-caps may well provide interesting opportunities to investors,” it said.
On Granules India it said management believes FY19-20 will be growth years for the company and management expects a significant ramp up in both the US and Omnicare JV businesses. It has a buy rating on the stock with a target price of Rs 180.
HDFC Securities said expected ANDA approvals in 2HFY18 and FY19 will be the key growth drivers while for Laurus Labs ANDA approvals could start from the 2HFY18. It said the management expects the Laurus Labs’ US business to constitute one-third of the total business, and the CRAMS business to touch Rs 5bn by FY21.
Citi Research, which has a neutral rating on Laurus Labs said in a note “Laurus’ global leadership in select, high growth APIs / therapies and efforts to move up the value chain into formulations augur well for long-term growth.”
It added that a lot hinges on execution and the big growth drivers which appear over a year away, but said the valuations are reasonably fair at 22x FY18E EPS which is at a 20% premium since the company’s IPO. The brokerage has a target price of Rs580 on the stock.
HDFC Securities in a note said it met with the management of some emerging formulations players such as Granules India and Laurus Labs and added that the outlook may be healthy for both companies. “Since growth challenges and regulatory issues bedevil many large-caps, we believe mid-caps may well provide interesting opportunities to investors,” it said.
On Granules India it said management believes FY19-20 will be growth years for the company and management expects a significant ramp up in both the US and Omnicare JV businesses. It has a buy rating on the stock with a target price of Rs 180.
HDFC Securities said expected ANDA approvals in 2HFY18 and FY19 will be the key growth drivers while for Laurus Labs ANDA approvals could start from the 2HFY18. It said the management expects the Laurus Labs’ US business to constitute one-third of the total business, and the CRAMS business to touch Rs 5bn by FY21.
Citi Research, which has a neutral rating on Laurus Labs said in a note “Laurus’ global leadership in select, high growth APIs / therapies and efforts to move up the value chain into formulations augur well for long-term growth.”
It added that a lot hinges on execution and the big growth drivers which appear over a year away, but said the valuations are reasonably fair at 22x FY18E EPS which is at a 20% premium since the company’s IPO. The brokerage has a target price of Rs580 on the stock.
