Jefferies India remains bullish on the Indian pharma companies, as it believes that Indian contract development and manufacturing companies are seeing significant order flow improvement with strong growth visibility. The research firm has initiated coverage with a ‘buy’ rating on two pharma stocks — Gland Pharma and Laurus Labs, and sees a rally of up to 20 per cent. With the initiation of Gland and Laurus, Jefferies has also expanded its India Pharma CRO/CDMO coverage to five, including Divi’s, Syngene, and Piramal.
Under its coverage, Jefferies India has a ‘buy rating on Syngene International, and Piramal Enterprises as well. It has a ‘hold’ rating on Divis Laboratories stock. ” Several differentiated business models have emerged, and we like the ones where vendors operate in less competitive spaces and those backed by proven management,” the research firm said.
Gland Pharma
Buy, CMP: Rs 3951.05, TP: Rs 4,566, Rally: 15.6%
Jefferies India sees a rally of nearly 16 per cent in Gland Pharma stock. Gland Pharma’s Rs 6,480-crore IPO, India’s biggest pharma public issue, was sold at a price band of Rs 1490-1500 per share. Even as its IPO received a tepid response, the shares saw the listing with a premium of 14 per cent at Rs 1,710 apiece on 20 November 2020. So far, this pharma stock has soared 163.4 per cent from IPO price, while 131 per cent from listing price. The research firm said Gland Pharma, a B2B player, has built its expertise over several decades in the difficult-to master injectables space. The company has a pristine track record on USFDA audits, and maintaining such compliance for injectables facilities has been a differentiator.
Laurus Labs
Buy, CPM: Rs 527.20, TP: Rs 628, Rally: 19%
Jefferies India noted that Laurus Labs have a proven API capability which is helpful in CRO ( (Contract Research Organisation) or CDMO. Laurus has initiated a large capex cycle that will increase its gross block by 67% in the next 18 months with investments in API, Finished Dosage, and Custom Synthesis, the research firm noted.
Jefferies prefers Gland Pharma and Syngene International for their defendable business models and Laurus for runway to growth in the CDMO synthesis business. The research firm added that in the past year, Gland has been the best-performing CDMO player, gaining 66%, with Laurus not far behind at 52%. The Nifty Pharma index was flat, showing that CDMOs are ‘flavor of the season for investors. We value Gland Pharma at 36.5x FY24E EPS, in line with its historical one-year forward of 37x.
(The stock recommendations in this story are by the respective research analysts and brokerage firms. Financial Express Online does not bear any responsibility for their investment advice. Capital markets investments are subject to rules and regulations. Please consult your investment advisor before investing.)
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