Top 4 Pharma Stocks To Add To Your Watchlist
Globally, India ranks third in terms of pharmaceutical production by volume and 14 by value.
Do you remember the time when things were like last year? Remember how the outbreak of Covid-19 wreaked havoc on the world?
Now, because of Omicron, we’re back, asking many of the same questions and feeling a heightened sense of foreshadowing about the future.
However, the pandemic or the new variant has brought together not only its own problems but also various possibilities for the pharma sector of India. Medicines are essential to life and the pharmaceutical industry has occupied the central stage.
Do you know that India is called the ‘Pharmacy of the World’?
As per the available data, India is the largest provider of generic drugs globally. The Indian pharmaceutical sector supplies 50% of the global demand for various vaccines, 40% of generic demand in the US and 25% of all drugs in the UK.
Globally, India ranks third in terms of pharmaceutical production by volume and 14 by value.
In addition, India exported 58.4 million doses of COVID vaccines to 70 countries by March 2021.
With low-cost trained labor and a well-established manufacturing base, India is poised to play an even bigger role in global drug safety. India will continue to be one of the most popular pharmaceutical markets in the world for years to come.
Several pharma stocks, especially those addressing the Omicron variant, have recently sparked investor interest, resulting in soaring stock prices.
With the help of Equitymaster’s powerful stock screener, we have narrowed down the top listed pharma companies.
These are the stocks that came up when we ran the screener for the top pharma companies in India.
1. Aarti medicine
Aarti Drugs was established in the year 1984 and is part of $900 million Aarti Group of Industries with strong Research and Development (R&D) Division at Tarapur, Maharashtra Industrial Development Corporation (MIDC).
The company is engaged in manufacturing and selling of Active Pharmaceutical Ingredients (APIs), Pharma Intermediates, Specialty Chemicals as well as Formulations.
It is one of the world’s largest producers of metformin, fluoroquinolones, tinidazole, metronidazole benzoate, ketoconazole and nimesulide.
The company exports its products to more than 100 countries in Europe, Australia, Africa, Asia, Latin and North America.
Aarti Drugs reported flat revenue on a year-on-year and sequential basis, while margins remained under pressure during the September 2022 quarter.
The Profit After Tax (PAT) of the company has declined by 43.4% year-on-year (YoY).
Remuneration related to continued upward movement in raw material prices, supply chain disruptions due to unexpected power outages in China, sudden rise in coal prices, increased freight costs due to shortage of shipping containers, and one-time employee expenses Modifications, all impacted margins.
However, the company has delivered decent profit growth of 32.5% Compound Annual Growth Rate (CAGR) in the last 5 years.
The stock has lost 26.7% in the past year. The stock of Aarti Drugs is trading up 3.5% in the last 30 days.
2. JB Chemicals
JB Chemicals & Pharmaceuticals (JBC), established in 1976, is one of the fastest growing pharmaceutical companies in India. It is a leading player in the Hypertension segment.
The company is also engaged in the business of manufacturing and marketing a diverse range of Pharmaceutical Formulations, Herbal Remedies and APIs.
Its strong presence in India accounts for most of its revenue. These two other major markets are Russia and South Africa.
In India, JB Chemicals has five brands in the top 300 brands in the country. The company exports its finished formulations to over 30 countries, including the United States.
Apart from supplying branded generic formulations to several countries, it is also a leader in manufacturing of medicinal lozenges. The company ranks among the top 5 manufacturers of medicated and herbal lozenges globally.
Lozenges are a well accepted therapeutic option globally. But, in India it is still in the initial stage. This may be because there are very few players in this area. The ecosystem is yet to be built in India and most of the lozenges are OTC products.
The prescription market for lozenges in India is estimated to be around Rs 150 crore. The company expects its new therapeutic options to expand the market.
During the quarter of September 2022, the company reported a 32.4% increase in its consolidated net profit on account of strong operating performance in India and international business despite pandemic issues and supply chain uncertainties.
The company earns 47% of its revenue from its domestic business and 53% of its revenue from international business.
The company said in a report,
Over the past year, a number of initiatives including a re-aligned go-to-market model, diversification in complementary therapies and new launches have helped the company maintain its growth momentum in India leading to market share gains and improved rank Is.
Shares of JB Chemicals & Pharmaceuticals have gained up to 63 per cent in the last one year. The counter is up 2.1% in the last 30 days.
3. Aurobindo Pharma
Aurobindo Pharma is an Indian pharmaceutical manufacturing company headquartered in HITEC City, Hyderabad, India.
The company started operations in 1988-89 with a single unit manufacturing semi-synthetic penicillin at Pondicherry.
It is also present in six major therapeutic areas – antibiotics, anti-retroviral, cardiovascular products, central nervous system, gastroenterological, and anti-allergic.
The company markets its products in more than 150 countries. Its marketing partners include AstraZeneca and Pfizer.
Aurobindo Pharma’s consolidated profit declined 2.1% to Rs 700 crore for the second quarter ended September 30, 2021, from Rs 700 crore in the same quarter of the previous fiscal.
Profitability was impacted by higher logistics costs along with cost pressures on some key raw materials.
However, most of the segments performed well due to marginal increase in demand and increase in market share.
Its R&D expenses during the quarter stood at Rs 400 crore, accounting for 6.7% of revenue.
The company has aggressive plans to grow its injectables business. It aims to reach $650-$700 million of global injectable revenue by fiscal year 2025.
Over the past three months, the company’s stock price has been trading down 2%.
4. IPCA Labs
IPCA Laboratories is an Indian multinational pharmaceutical company based in Mumbai.
It produces thiobromine, acetylthiophene and p-bromo toluene as API. IPCA sells these APIs and their intermediates all over the world. It produces over 150 formulations, including oral liquids, tablets, dry powders and capsules.
IPCA reported a 6.3% decline in its consolidated net profit at Rs 250 crore for the second quarter ended September 30. It reported sales of 14% YoY at Rs 1,530 crore for the quarter ended September.
Over the past 5 years, the company’s revenue has grown at an annual rate of 13.6%. Its market share increased from 1.6% to 2.1% for the same period.
Last month in November, IPCA Laboratories acquired a 26.57% stake in Lyca Labs for Rs 978.9 million. IPCA’s management sees the formulations segment as one of the key growth drivers, with the domestic market providing the lion’s share. The acquisition will also aid management’s aspirations for new product lines to enter a new worldwide market, allowing for greater market access.
IPCA has planned an ambitious capital expenditure of around Rs 400 crore over the next 3-4 years. The company is adding a new plant at Dewas to ramp up its API production, it is likely to come online by the first quarter of the next financial year and will increase the capacity by 25%.
Over the past 30 days, IPCA’s share price is down 1.7%. It is down 6.2% in the last one year.
For more details, see IPCA Laboratories’ 2020-21 Annual Report Analysis.
Snapshot of Top Pharma Stocks in India from Equitymaster’s Stock Screener
Here’s a quick overview of these companies based on some key financial conditions.
pharmacy
photo credit: bloomberg
These parameters can be changed as per your selection criteria. This will help you identify and eliminate stocks that do not meet your criteria. It will also emphasize stocks that meet these metrics.
To finish …
Over the past year, the Indian pharma industry has played a key role in clinical trials and manufacturing of drugs for COVID-19 treatments.
The pandemic could prove to be a boon for pharma companies as it prompted them to accelerate focus on various pharma sectors.
In addition, the efforts of pharma companies have been supplemented by the Production-Linked Incentive (PLI) scheme of the government.
The Department of Pharmaceuticals has launched a PLI scheme to promote domestic manufacturing by setting up greenfield plants with a cumulative outlay of Rs 6,940 crore from FY 2021 to FY 2030.
As the third largest producer of pharma products in the world, India has attracted global attention with hopes of meeting the global demand.
However, for a brighter future, pharma companies will need to embrace the right opportunities and spend as much as possible on manufacturing facilities and R&D.
Identifying fundamentally solid pharma stocks is both an art and a science and a game of big numbers.
One should always strive to invest money in a solid pharma company with a long track record of successful operations. If there is not enough confidence in the stock in the market, it may collapse before the market realizes its true potential.
Happy investment!
Disclaimer: This article is for informational purposes only. This is not a stock recommendation and should not be treated as such.
(This article is syndicated from Equitymaster.com)
(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)
