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Bet on these 3 pharma stocks for impressive returns

, ET Bureau|

19 Nov 2020, 01:53 PM IST

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Pharma bets

With multiple factors being in favour of the pharmaceutical sector, Haitong Securities is most bullish on Dr Reddy's Laboratories, Eris Lifesciences and Alkem Laboratories. In a note released today, the brokerage said pharma companies have posted strong operational numbers for the second straight quarter despite the ongoing pandemic, and these stocks are much more attractively priced now than three months ago. The brokerage said regulatory worries should stay away for the next six months and there is good earnings visibility for the next three years due to approval of niche products in the US, ramp-up in specialty business, recovery in India segment with improved cost structure, and China to India migration in APIs. Haitong prefers companies that have already put in capital expenditure and are likely to commercialize those plants over the next two years.

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Dr Reddy's Laboratories | Rating: Outperform | Target Price: Rs 6,400

The brokerage has raised FY21 EPS estimates of Dr Reddy's by 3.9 per cent to Rs 165.4, and for FY22 by 2.1 per cent to Rs 197.9 following Q2 results. In a note last month, Haitong Securities had said Dr Reddy's was on course to becoming the largest pharmaceutical company in India by market cap. Dr Reddy's is one of the few largecap pharma companies where almost every business segment is profitable and performing well, it had said in the note.

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Eris Lifesciences | Rating: Outperform | Target Price: Rs 690

Haitong has raised FY21 EPS estimate of Eris by 2.5 per cent. The tail brands are bottoming out and fast growing brands have started impacting the top line performance of the company, said Haitong in a recent note. Eris will launch several cardio-diabetic products over the next 3-4 years which will further boost the performance, the brokerage said.

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Alkem Laboratories | Rating: Outperform | Target Price: Rs 4,400

The recent ramp-up in ANDA approvals received and launches have been the key drivers in US business performance of Alkem, said Haitong in its recent note. The management is looking at more than 12 launches every year to fuel growth, the brokerage said. Haitong in its note on Thursday raised Alkem's EPS estimates by 8.2 per cent to Rs 119.5 while FY22 and FY23's EPS estimates have been increased by 4.2 per cent each.