Pharma shares gain; Biocon, Granules hit record highs, Sun Pharma up 3%

At 10:27 am, Nifty Pharma index was up 1.5 per cent, as compared to 0.22 per cent decline in the benchmark Nifty50 index

Shares of pharmaceutical companies rallied up to 6 per cent on Friday in an otherwise range-bound market amid expectations that growth is picking up in the sector after two consecutive months of decline.

According to a report by ICICI Direct, the Indian Pharma market is back in the green posting 2.4 per cent YoY growth in June 2020. "Cardiac therapy grew 11.8 per cent (3.9 per cent in May), anti-diabetic was up 7 per cent (1.1 per cent in May) and respiratory grew 9.3 per cent (vs 5.9 per cent de-growth in May). Anti-infectives were flat YoY (down 0.1 per cent) vs. - 20.8 per cent in May," the report said.

Among individual stocks, Granules India (up 6 per cent at Rs 240) and Biocon (3% at Rs 419) hit their respective fresh record highs, while Aurobindo Pharma (2% at Rs 829) touched 52-week high today. Sun Pharmaceutical Industries, Divis Laboratories, Cipla, Torrent Pharmaceuticals, Cadila Healthcare and Lupin from the Nifty Pharma index were up in the range of 1 per cent to 3 per cent on the National Stock Exchange (NSE).

At 10:27 am, Nifty Pharma index, the top gainer among sectoral indices, was up 1.5 per cent, as compared to 0.22 per cent decline in the benchmark Nifty 50 index.

Among the individual stocks, Granules India surged 6 per cent to Rs 240, extending its Thursday 8 per cent rally, on expectation of good earnings for April-June quarter (Q1FY21).

The company’s revenue for the quarter ended March, 2020 (Q4FY20), declined 2.2 per cent year on year (YoY) to Rs 600 crore due to restriction imposed on Paracetamol active pharmaceutical ingredients (API), pharmaceutical formulation intermediates (PFI) and finished dosage (FD). The restrictions were removed for PFI and FD on April and API by the end of May.

With the ban no longer in place, analysts at Anand Rathi Share and Stock Brokers expect growth to pick up in April-June quarter (Q1FY21) as demand for paracetamol has risen amid the Covid-19 pandemic. The brokerage firm expects Granules to aptly capitalize on the opportunity. Besides, the management is upbeat about the near-term performance and expects to beat its previous guidance of 20 per cent topline growth in FY21.

Analysts at Emkay Global Financial Services expect the pharma sector to continue to relatively outperform in the near term given the defensive earnings characteristics, but after a sharp run-up, the brokerage firm remain selective as valuations leave little room for execution misses.

“More than the earnings, we believe investors will keenly watch out for management commentaries on the pace of recovery, especially in India, as Street estimates still range between 5 per cent and 7 per cent for FY21,” the brokerage firm said in Q1 preview.