Pharma shares in focus; Nifty Pharma index hits 6-month high

The approval rate had remained soft during the past few years and was the key reason for poor US sales
Shares of pharmaceutical companies were in focus with Nifty Pharma index rising nearly 2% to hit a six-month high on Thursday in otherwise weak market.

At 01:37 PM; Nifty Pharma index, the largest gainer among sectoral indices, was up 1.6% at 9,450 points, as compared to 0.6% decline in the Nifty 50 index. The pharma index hit intra-day high of 9,519, its highest level since January 31, 2018.

The S&P BSE Healthcare index, up 1.4% at 14,562, also hit six-month high of 14,631 on the BSE in intra-day trade today. On comparison, the S&P BSE Sensex was trading 0.7% or 257 points lower at 37,264.

Divi's Laboratories, Aurobindo Pharma, Lupin, Dr Reddy’s Laboratories, Sun Pharmaceutical Industries, Glenmark Pharmaceuticals and Cipla from the Nifty pharma index were up in the range of 1% to 3% on the NSE.

Kopran, Marksans Pharma, Morepen Laboratories, Indoco Remedies, Alembic Pharmaceuticals and RPG Lifesciences were the non-index pharma stocks trading higher by up to 5%.

After four quarters of decline, April-June quarter (Q1FY19) is expected to be first quarter for pharma sector to show healthy growth in profit after tax (PAT) on a year-on-year (YoY) basis. EBITDA (earnings before interest, tax, depreciation and amortization) is expected to be on upward trajectory, which started in December-March quarter (Q4FY18).

“The strong growth is expected on the back of muted performance in Q1FY18, largely led by demonetization. In addition, companies focused on domestic formulation are expected to continue recovering from GST-led disruption. The intensity of price erosion in US generics is expected to reduce from high-double-digit to high-single-digit. The increased API prices on account of slowdown in supply from China are expected to moderately affect margins of companies under coverage,” analysts at Motilal Oswal Securities said in Q1FY19 preview.

After 4-5 quarters of decline in the US business, the current quarter is expected to witness decent growth. This is primarily due to low base effect, as the intensity of price erosion is expected to come down from high double digit to high single digit. The base business erosion is expected to continue. However, potential approvals would help negate this issue for few companies, added report.

“The pharmaceutical companies are expected to report healthy performance in April-June 2018 quarter (Q1FY19) with 15.8% year-on-year (YoY) and 25.1% YoY growth in sales and earnings, respectively owing to strong growth in domestic formulation business and low base YoY impact,” analyst at Reliance Securities said in results preview.

While domestic business of the brokerage coverage companies is expected to report a strong 27.6% YoY growth on lower YoY base, while the US business is likely witness 8.3% YoY growth in CC terms, it added.

COMPANY LATEST PREV CLOSE GAIN(%)
MOREPEN LABS. 35.30 33.60 5.06
MARKSANS PHARMA 29.30 27.90 5.02
IOL CHEMICALS 105.60 100.60 4.97
J B CHEM & PHARM 282.75 270.05 4.70
ALEMBIC PHARMA 579.30 555.90 4.21
KOPRAN 54.65 52.55 4.00
ALKEM LAB 2211.95 2141.15 3.31
DIVI'S LAB. 1194.30 1161.65 2.81
RPG LIFESCIENCE. 283.30 275.55 2.81
DR REDDY'S LABS 2227.15 2171.25 2.57
INDRAPR.MEDICAL 44.75 43.65 2.52
AUROBINDO PHARMA 614.00 598.95 2.51
LUPIN 863.10 842.40 2.46
THEMIS MEDICARE 348.00 339.65 2.46
ABBOTT INDIA 7863.05 7682.60 2.35
ANUH PHARMA 161.00 157.55 2.19
NECTAR LIFESCI. 21.05 20.60 2.18
ALEMBIC 41.00 40.15 2.12


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