Sanjiv Bhasin says Pharma is where IT was 20 years back and it became a mainstay..He further discusses the bullish outlook on Lupin and highlights the growth prospects of pharma companies like Dr Reddys. He also comments on the potential of Indian tourism in Vietnam and the othere related sectors.
On Tuesday, when the whole market was reeling under pressure, two stocks reacted to their numbers in a positive direction. Both of them were large caps from one sector which is pharma. This becomes significant from three perspectives. First, that positive reaction was there on the day when there was a bloodbath on the street. Second, these stocks were already sitting on gains, so there is little probability of short covering leading to this sort of gains. Last but not the least it has come from sectors like pharma which have seen a very long phase of business remodelling and valuation readjustment, which makes it worth noticing. It might be too early to call, but if a re-rating gets momentum then they might be candidates for volatile markets.
Indian per capita income increase will lead to increased spending on healthcare and medicines, including both generic and non-generic products. The generic market is attractive, projected to be around $600 billion in 2030. MNCs focus on proprietary products, taking advantage of improved GDP and per capita income. Indian companies are engaged in complex generics and biosimilars research, with potential for huge benefits. Patent expirations in 2025 will create opportunities for Indian companies.
Devang Mehta discusses the bullish themes in the pharma space, particularly MNC pharma companies like Abbot India. These companies have a huge market share, impressive earnings, and margins, and work with a negative working capital cycle. Another area of interest is the CRAM space, where companies like Syngine operate and provide R&D services to Fortune 500 and pharma companies.
The year 2024, started with a correction in nifty, but one set of stocks which were able to outperform were pharma stocks. While it might appear to be a sudden up move, if one looks at what has happened in the pharma sector in the last eight years, there is a good chance that right from valuation readjustments to changing business model might play a role bringing the large pharma companies back into limelight. Infact some of these stocks have quietly inched upward in the last few months. It might be too early to call, but if a re-rating plays out in this space, it might surprise many in terms of price movement.