Pharma Update - Worst phase possibly behind us: Angel Broking

Views of Ms. Sarabjit Kour Nangra (VP Research- Pharma, Angel Broking):

"While the Nifty has given returns of (+17.4%) over the last 1 year, the Pharma index has given a return of (-21.6%). The reasons have been plenty, where all that could go wrong had gone wrong. In, exports key market USA, saw challenges in the form of 483's and import alerts, for most of the major companies. Also the number of approvals from the USA FDA got delayed, and hence there was an impact on the US sales of the companies, which was profound as the US accounts for close to 40% of Indian pharma exports and remains the biggest market for Indian generics. Apart from the USA, back home in India, the companies faced challenges on back of the government putting couple of drugs under the pricing pressure, which impacted the domestic sales of the Indian companies.

While the domestic sales for some companies have normalised in 4QFY2017, others could see some uptick during FY2018. On exports front, especially USA saw the pricing pressure intensify in 4QFY2017, which was more pronounced with low launches. Also, many of the company also posted extra-ordinary expenses on their R&D expenditures, which resulted in them putting up a bad quarterly performance. However, the sharp fall in stock prices has also resulted in the valuations of these stocks becoming attractive, and hence we believe this provides the long term-investors an entry point.Our top picks are Sun Pharma, Lupin and Aurobindo Pharma."

Source : Equity Bulls

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