At 10:25 am; Nifty Pharma index, the largest gainer among sectoral indices, was up 1.5% at 3,386, as compared to 0.71% rise in the Nifty 50 index. The pharma index hit an intra-day high of 9,781, up 2%, touched its highest level since January 25, 2018.
Thus far in the current week, the Nifty Pharma index outperformed the market by surging 7% against a marginal 0.31% rise in the benchmark index. Sun Pharma, Dr Reddy’s Lab, Biocon, Lupin and Aurobindo Pharma rallied more than 7% during the week.
Among the individual stocks, Sun Pharma hit a 14-month high of Rs 633, up 2% in intra-day trade. The stock trading at its highest level since May 23, 2017, rallied 13% in past one week after it reported a better-than-expected June quarter (Q1FY19) results.
Sun Pharma posted good numbers in Q1FY19. Revenue grew 16% year on year (YoY) to Rs 72.2 billion, and the EBITDA margin expanded 460 bps to 22.2%. EBITDA at Rs 16.1 billion and PAT at Rs 9.8 billion were up 46.6% and 86.9% YoY respectively.
“Despite challenges in the US generics space and decline in the Taro business, Sun Pharma managed 12% growth in revenues in the US market. Additionally, good performance in India which showed growth of 22% coupled with 11% growth in ROW driven by key markets
including Romania, Eastern Europe, and Asia led to positive results for the quarter,” analyst at HDFC Securities said in results review.
“With a strong performance in Q1FY19, Halol resolution, and depreciating rupee, Sun Pharma is likely to beat its top line guidance in FY19. Margins could remain subdued for one year due to front end cost incurred for fledging specialty business in the US. Benefits are likely to be visible from FY20 onwards with ramp up expected in products like Yonza, Illumya, Seceira and other specialty molecules,” the brokerage firm said with ‘buy’ rating on the stock and target price of Rs 670 per share.
JP Morgan has ‘Overweight’ rating on Aurobindo Pharma, with potential upside driven by execution of US business, growth in Europe and stability in margins.
“In our view, the US growth momentum will be driven by new launches (offset elevated base business pressure), injectable pipeline monetization and other diversified drivers (OTC, Natrol outside of generics) given no pending regulatory issues in its facilities. We believe earnings visibility in a tough U.S. generic environment and debt reduction over time should help support stock performance over the next year,” the brokerage firm said with Mar-19 price target of Rs 775.