This pharma stock is among HDFC Securities' top picks over the next two quarters

Indoco Remedies shares have surged 45% this year, Photo: BloombergPremium
Indoco Remedies shares have surged 45% this year, Photo: Bloomberg
 2 min read . Updated: 23 Aug 2021, 04:05 PM IST Livemint

Pharmaceutical company Indoco Remedies one of the top stock picks by domestic brokerage and research firm HDFC Securities with a time horizon of two quarters. Indoco Remedies has presence across domestic market, US and EU markets and Emerging Markets. The company has brands in the domestic formulations business across acute, chronic/sub-chronic segment.

The brokerage said that the drug firm is expected to post strong growth in India business due to opportunities arising from Covid portfolio and led by new launches in FY22. The company offers medicines in therapeutic areas such as stomatology, respiratory, ophthalmology, Gastro-Intestinal, Vitamins, women’s health and anti-infectives.

"We feel investors can buy the stock in ₹457-462 band and add more on dips at ₹413-419 band for base case target of ₹506 and bull case target price of ₹540 over the next two quarters," HDFC Securities said in a note.

Management has guided for robust growth in FY22; the company has already registered strong revenue in Q1FY22. US business is expected to grow at robust pace as ANDAs will be commercialized at regular intervals. The company has guided for 30-35% growth in the domestic business in FY22. Growth drivers will be improved productivity for its chronic and sub-chronic area, Covid related boost and new product launches, it added.

On the back of stronger revenue growth, operating leverage would also play a part and it estimates 280 bps margin expansion over the next two years. Robust export revenue growth, healthy margin expansion, lower capex outlay and improvement in return ratios are key triggers.

Indoco Remedies Ltd, is a fully integrated, research-oriented pharma company engaged in the manufacturing and marketing of Formulations (Finished Dosage Forms) and Active Pharmaceutical Ingredients (APIs).

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

 

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