Pharma shares in focus; Divi's Labs hits new high, Gland Pharma zooms 20%

Dishman Carbogen Amcis, Ipca Lab, SPARC, Caplin Point Laboratories, Dr. Lal PathLabs and Granules India from the S&P BSE Healthcare index were up in the range of 4 per cent to 5 per cent on the BSE

Shares of pharmaceutical companies were trading actively on Monday with the newly listed Gland Pharma freezing in the 20 per cent upper circuit while Divi's Laboratories hit a record high on the BSE on investors' renewed buying interest.

Dishman Carbogen Amcis, Ipca Laboratories, Sun Pharma Advanced Research Company (SPARC), Caplin Point Laboratories, Dr. Lal PathLabs and Granules India from the S&P BSE Healthcare index were up in the range of 4 per cent to 5 per cent on the BSE. Meanwhile, the S&P BSE Healthcare index, the top gainer among sectoral indices, was up 1.7 per cent as compared to 0.17 per cent decline in the S&P BSE Sensex at 10:47 am.

Recently listed Gland Pharma was locked in the 20 per cent upper circuit at Rs 2,184, extending its 21 per cent surge on Friday, the first day of its listing at the bourses. With today's rally, the stock of the pharma company is up 46 per cent as against its issue price of Rs 1,500 per share.

The Fosun-promoted firm's initial public offer (IPO) had managed to sail through on the back of institutional investor support even as retail and high networth individual (HNI) investors shunned the issue. Analysts had recommended Gland Pharma citing its attractive valuation, healthy growth rate, and margins.

Analysts at KR Choksey believe that Gland Pharma has a unique business model of B2B nature, aided by vertical integration and R&D expertise. Moreover, the company has expansion plans in terms of geographical and capacity expansion and is open to inorganic opportunities as well. It also has a strong balance sheet with negligible debt and strong cashflows.

Meanwhile, shares of Divis Labs were up 5 per cent to Rs 3,636, surpassing its previous high of Rs 3,499 touched on November 19, 2020. In the past one month, the stock has gained 18 per cent as compared to a 8-per cent rise in the S&P BSE Sensex.

The company had reported a strong 45.6 per cent year-on-year (YoY) jump in its net profit at Rs 520 crore on the back of healthy operational performance for September quarter (Q2FY21). Its revenues grew 21 per cent YoY to Rs 1,749 crore. EBITDA (earnings before interest, taxes, depreciation, and amortisation) margins expanded 843 bps YoY to 42.4 per cent due to significantly better gross margin performance and lower other expenditure.

Analysts at Dolat Capital believe that Divi's is well positioned to capture its share of the growing CMO market coupled with benefits unravelling in the generic API market driven by dual sourcing/China+1 strategy. Slower ramp up in API commercialization (scale benefits to accrue from FY23E onwards) will be offset by expansion in the Custom Synthesis (CMO) business led by higher wallet share from global players, the brokerage firm said in result update.

Shares of Wockhardt, on the other hand, hit a 52-week high of Rs 433, up 10 per cent in the intra-day trade, zooming 32 per cent in the past two trading days on back of heavy volumes. The company, on August 3, 2020 entered into an agreement with the UK Government to finish Covid-19 vaccines for which manufacturing will be undertaken at CP Pharmaceuticals, a subsidiary of Wockhardt based in Wrexham, North Wales. "As per the terms of the agreement, the company has reserved manufacturing capacity to allow for the supply of multiple vaccines to the UK Government in its fight against Covid-19, including AZD1222, the vaccine co-invented by the University of Oxford and its spin-out company, Vaccitech, and licensed by AstraZeneca," the company had said in a statement.