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Informist, Friday, Jan. 17, 2025

MUMBAI – Shares of pharmaceutical companies are seen correcting next week as investors may book their profit after the sector's recent outperformance, analysts said. With all the upsides already priced in for these stocks, analysts see no major upsides hereon even as investors shift their focus to the December quarter earnings. However, they sounded caution that these stocks may see downward revisions if their earnings failed to impress the Street.

The Nifty Pharma index has outperformed all other sectoral indices over the past 30 days. The index closed at 22061.70 points, up 0.7%, on Friday. Directionally, the view on pharmaceutical stocks is negative and the Nifty Pharma index is seen retesting or even breaking the previous low of 21480 points by next week, Brijesh Ail, head of technical and derivatives at IDBI Capital Markets & Securities Ltd. said.

HDFC Securities expects pharmaceutical companies covered by it to report a 10% on-year growth in sales, driven by a 13% on-year increase in their business in India. However, this is expected to be offset by flattish sales in the US. Moderate price erosion, steady traction in key products, and a scale-up in the speciality drug segment will partly balance the negligible sales of the Revlimid generic, the brokerage said. Dr. Reddy's Laboratories, Torrent Pharmaceuticals Ltd., Laurus Labs Ltd., and Mankind Pharma Ltd. will detail their earnings for the December quarter next week.

For the December quarter, Dr. Reddy's is expected to post a consolidated net profit of INR 14.73 billion, up 7% on year, while its revenue is expected to rise 13% on year to INR 81.57 billion, according to an average of analysts' estimates. Torrent Pharma is expected to post a consolidated net profit of INR 5.09 billion for the December quarter, 15% higher on year. The company's revenue for the quarter is expected to rise 9% on year to INR 29.77 billion, according to an average of estimates. 

Mankind Pharma's consolidated net profit for the quarter is seen rising 3% on year to INR 4.69 billion on revenues of INR 32.42 billion, 24% higher on year, according to an average of estimates by five brokerages. Laurus Labs' consolidated net profit for the quarter is expected to rise over threefold on year to INR 788.25 million and its revenue is expected to rise 12% to INR 13.41 billion, according to an average of analysts' estimates.

Contract development and manufacturers are expected to post strong earnings for the latest quarter, a research associate at a domestic broking firm said. "These companies will see margin expansion and their revenues are expected to grow 12-15%," the research associate said. Among pharmaceutical stocks, the research associate prefers Piramal Pharma Ltd. and Divi's Laboratories Ltd.

Shares of Gland Pharma Ltd. fell nearly 6%, making it the worst-hit stock in the Nifty Pharma index this week. Glenmark Pharmaceuticals Ltd., Mankind Pharma and Ipca Laboratories Ltd. fell 4-6% and were among the worst hit. On the other hand, shares of Biocon gained over 9% and were the top gainer in this sectoral index.

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Following are the resistance and support levels for the stocks for next week as per calculations by Informist based on their prices on the National Stock Exchange:

End

Reported by Steffy Maria Paul

Edited by Akul Nishant Akhoury

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