Pharma stocks gain; Divi's Labs, Dr Reddy's, Pirmal Enterprises rise 1.50%

Most pharma stocks were trading in the green in the morning trade on Monday. The Nifty Pharma index was trading over half a per cent higher in a flat market. 

At 11:27 am, the Nifty Pharma index was ruling 0.84 per cent higher at 8,020 levels with Divi's Labs leading the chart with nearly 2 per cent gains. Piramal Enterprises, Dr Reddy's, and Glenmark Pharma rallied up to over 1 per cent. Other gainers in the index included Aurobindo Pharma, Sun Pharma, Glenmark Pharma, and Cadila Healthcare. In comparison, the benchmark Nifty50 index was hovering around 11,950 levels, up 0.23 per cent.

According to a report by Business Standard, the Indian pharma market (IPM) registered a 14.5 per cent year-on-year (YoY) growth in November, one of the best growths seen in more than 32 months. Data from market research firm AIOCD AWACS showed that in November last year, the IPM had clocked a 7 per cent growth. In terms of moving annual turnover (MAT), which considers the past 12 months' turnover, the MAT November growth is at 9.8 per cent. READ MORE

For the September quarter, pharma companies posted a muted performance as revenue grew 11 per cent YoY but PAT (profit after tax) edged down 1 per cent YoY, adjusted for one-offs, according to Edelweiss Securities. "Growth was led by domestic market while US languished due to lack of meaningful launches and non-recurrence of one-time supply opportunities. India performance was led by volume growth in acute, on the back of high incidence of vector-borne diseases in the wake of heavy monsoon," the brokerage added. 

It has upgraded Cipla’s FY21E earnings by 20 per cent and downgraded those for Divi's Labs and Glemmark Pharma by 14 per cent each. "Regulatory risks escalated for Aurobindo Pharma, Ipca labs, Cadila, Torrent Pharmaceuticals and Glemmark Pharma, with inspections leading to warning letter/OAI. As regulatory risks heightened, valuations came under pressure – currently at 15.8x rolling one-year forward earnings, narrowing the sector’s premium to Nifty to 8 per cent (from 10 per cent after Q1FY20). Maintain Dr Reddy's and Cipla as our top ‘BUY’ and Sun Pharma as our top ‘REDUCE’ idea," it said.