It has been a weak Q1FY22 for most of the pharmaceutical companies. Six out of 12 companies have missed margin estimates this time. Margins were weak due to factors such as price pressure re-emerging in the US and higher costs due to COVID-19.
Aditya Khemka, Fund Manager at InCred Financial Services, and Anmol Ganjoo, Pharmaceuticals Research Analyst at JM Financial Institutional Securities assessed the Q1 performance of the pharma and healthcare sector.
Khemka said this is a common misperception that COVID-19 increased sales for pharma companies and hospitals. This may be true for the diagnostic companies, but pharma companies and hospitals actually suffered more loss of sales due to COVID, he said.
He added that most of the hospitals were shut down for a very long time due to COVID-19. "We believe that pharma and hospitals are equally a COVID recovery play too. We don’t believe the best is behind us, we believe the best is ahead of us."
Ganjoo seconded Khemka and said Covid has not really benefitted the pharma sector. “COVID is not actually a beneficiary at an aggregate level but also inflicts fair share of cost and loss of revenue – that got exposed. We find there is a reset of expectations which is healthy. These are more normal and easy to surprise on the up and in the days to come we should be able to get a fairly attractive price point on various stocks,” said Ganjoo.
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