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Signs of green shoots may be reappearing in pharma sector, says CLSA; upgrades Torrent Pharma to 'buy'

Signs of green shoots may be reappearing in pharma sector, says CLSA; upgrades Torrent Pharma to 'buy'

Signs of green shoots may be reappearing in pharma sector, says CLSA; upgrades Torrent Pharma to 'buy'
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By Mousumi Paul  Jul 17, 2020 6:52:21 PM IST (Published)

The pharma index saw a deep V-recovery building up since April first week, and since then, it has zoomed 46 percent to current levels, outperforming the benchmark index Nifty50.

The pharma index saw a deep V-recovery building up since April first week, and since then, it has zoomed 46 percent to current levels, outperforming the benchmark index Nifty50. In fact, CLSA feels that there are more visible signs of green shoots ahead for this sector.

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According to the brokerage, acute therapy growth has turned positive and the normalisation of buying has helped chronic therapy growth remain robust. "The market declined 5 percent YoY in Q1FY21 and needs to grow 3-8 percent in M9FY21 to meet IQVIA’s forecast of 1 -5 percent growth in FY21," added the report.
CLSA's coverage in the pharmaceutical sector includes Dr Reddy's Laboratories and Torrent Pharma. In case of the former stock, the brokerage said that post Wockhardt acquisition, the company has grown ahead of the market.
"Continued strong traction in India's franchises sees us upgrade our recommendation on Torrent Pharma from Outperform to BUY with unchanged target price at Rs 2,920," added the brokerage further.
Torrent Pharma is a large cap pharma company specialised in generic pharmaceutical formulations. In its Q4FY20 earnings, it reported a net profit of Rs 314 crore as against the loss of Rs 152 crore in the same period last year.
Revenue from operations rose to Rs 1,946 crore from Rs 1,856 crore last year. The company also announced an interim dividend of Rs 32 per equity share for 2019-20.
"Our fourth quarter margins continued to benefit largely from the synergies of the acquired Unichem portfolio, incremental productivity and cost control. Our focus continues to remain on India, US, Brazil and Germany as our core markets," Torrent Pharmaceuticals executive chairman Samir Mehta said.
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