Prabhudas Lilladher Bullish on Healthcare Sector; Backs Sun Pharma, JB Chemicals, Eris Lifesciences, and Torrent Pharma Shares
Prabhudas Lilladher prefers companies with steady domestic franchises and strong US visibility. It has picked Sun Pharma, JB Chemicals, Eris Lifesciences and Torrent Pharma as its top picks.
Dalal Street is all set to kick start the earnings season for the quarter ended March 2024. In its recent report, brokerage firm Prabhudas Lilladher has maintained its bullish stance on the Healthcare sector and believes it will be another strong quarter aided by US sales and higher margins.
It expects pharmaceutical companies under its coverage to report another strong quarter with EBITDA growth of 22% YoY mainly aided by new launches (gRevlimid, gSpiriva, etc) in the US market, steady domestic business and higher margins.
The brokerage firm expects the quarter to continue seeing an easing of cost pressures which will thereby aid margins YoY. The companies are likely to witness steady base business in the US given a stable generic pricing environment coupled with new launches. On the domestic formulation business; acute and trade generic businesses would remain soft given seasonal weakness while chronic businesses would have a steady growth.
It noted that the Healthcare Index outperformed Sensex by 9% in Jan-Mar’24. “Our sectoral outlook remains positive led by tailwinds in US generics, healthy domestic formulations segment and normalization in input cost,” it said.
Prabhudas Lilladher prefers companies with steady domestic franchises and strong US visibility. It has picked Sun Pharma, JB Chemicals, Eris Lifesciences and Torrent Pharma as its top picks.
It has maintained a ‘BUY’ rating on the Sun Pharma stock with a target price of Rs 1,640. “Over last few years Sun Pharma’s dependency on US generics has reduced and the company’s growth is more functional on US speciality, RoW and domestic pharma business that continues to show strong growth visibility,” it said.
For JB Chemicals, it believes that the company’s strong positioning in domestic markets and focus on scaling emerging opportunities in the export segment, places it in an advantageous position to ride on near-term growth prospects. It has a ‘BUY’ rating on this stock with a target of Rs 1,920.
It has also maintained a ‘BUY’ rating on Torrent Pharma with a target of Rs 2,700. Strong presence in highly profitable branded business in domestic as well as Brazil and ROW market along with completion of Curatio acquisition gives us comfort on the stock, Prabhudas Lilladher said.
Lastly, it believes that Eris Lifesciences has multiple growth levers such as broad-based offerings in the derma segment, opportunities in the cardiometabolic market with patent expirations and benefits of operating leverage, as revenue scales up from these acquisitions. It has a ‘BUY’ rating with a target of Rs 1,100.
