Motilal Oswal Assigns Buy On 11 Stocks From Healthcare Sector, Sees Robust Gains In 2023

Motilal Oswal has recently released its December 2022 Results Preview report, where the brokerage has picked Ajanta Pharma, Apollo Hospitals, Dr Reddy's Labs, Eris Lifesciences, Gland Pharma, Granules, Ipca Laboratories, Laurus Labs, Piramal Pharma, Solara Active Pharma Sciences, and Sun Pharmaceutical Industries from the healthcare sector. It has assigned buy on these stocks with attractive valuations.

Stocks – Rating & Target Price

Sr.No.	Name of Stocks	Rating	Target Price
1	Ajanta Pharma	Buy	Rs 1,440
2	Apollo Hospitals	Buy	Rs 5,600
3	Dr Reddy's Labs	Buy	Rs 5,180
4	Eris Lifesciences	Buy	Rs 840
5	Gland Pharma	Buy	Rs 1,920
6	Granules	Buy	Rs 370
7	Ipca Laboratories	Buy	Rs 1,000
8	Laurus Labs	Buy	Rs 550
9	Piramal Pharma	Buy	Rs 160
10	Solara	Buy	Rs 520
11	Sun Pharma	Buy	Rs 1,200

 According to the brokerage, After reporting two consecutive quarters of earnings decline, the pharma companies under our coverage are expected to report 6% YoY earnings growth in 3QFY23. We expect 10% YoY sales growth to INR601b, led by growth improvement in domestic formulation (DF) YoY and a marginal pick-up in US sales on an aggregate basis. "EBITDA/PAT for our coverage companies (excluding APHS) are expected to grow by 7%/6% YoY in 3QFY23, aided by a moderation in the cost of raw materials and logistics. For APHS, Hospital's EBITDA is expected to rise 6% YoY; however, incremental spending on Apollo 24/7 is likely to reduce the profitability. Accordingly, we expect APHS to post 16% YoY sales growth, while its EBITDA/PAT may decline 17%/21% YoY in 3QFY23," the brokerage has said.

1. Ajanta Pharma Limited

According to the brokerage, Expect robust 15.5% YoY growth in DF sales driven by superior execution across therapies. Expect a 5.7% YoY decline in Africa (Branded + Institutional) sales on the high base of last year. Seasonal products to drive 8% YoY growth in US sales. Watch out for the outlook on 1) ANDA approvals/launches in the US, particularly niche products like g-Chantix, 2) measures taken to reduce cost pressures.

2. Apollo Hospitals Enterprise Limited

According to the brokerage, Expect hospitals Sales/EBITDA to grow by 6% YoY. Store addition and higher sales from existing stores to drive 35% YoY growth in pharmacy sales. Watch out for traction in services available on online Apollo 24/7 platform. Update on stake dilution in Healthco.

3. Dr Reddy's Labs Limited

According to the brokerage, Expect US sales to grow 15% YoY to USD285m, driven by healthy traction in niche products. India revenue to grow by 7% YoY led by gastro/respiratory/ cardiac therapies. Update on measures to improve growth prospects in the branded generics segment. Outlook in PSAI segment, given COVID-related volatility at the global level.

4. Eris Lifesciences Limited

According to the brokerage, Expect 28% YoY growth in sales, led by new launches and addition of Oaknet business. Increased promotional spend and higher opex related to Oaknet to pull EBITDA margin on YoY basis. Update on leveraging Oaknet reach and product pipeline in the derma category. Outlook on the marketing expenses over next 12M.

5. Gland Pharma Limited

According to the brokerage, Sales expected to grow modestly at 3% YoY. Update on business prospects in China. Outlook on potential filings of own/partner, which would drive growth over next 24-36M. Outlook on traction for existing products in ROW markets.

6. Granules India Limited

According to the brokerage, Expect broad-based growth across FDF, PFI, API to drive overall sales. Product mix supported by operating leverage would drive profitability. Watch out for capital expenditure for core molecules. Watch out for new product development/backward integration for existing products.

7. Ipca Laboratories Limited

According to the brokerage, Increased opex to drag EBITDA margin on YoY basis. Expect 8% YoY growth in the DF segment on high base of past year. Watch out for an outlook in the API segment in terms of new products and capacity utilization of Dewas facility. Update on Europe (Non-UK business) with favorable currency movement.

8. Laurus Labs Limited

According to the brokerage, Expect strong 141% YoY growth in CS segment. EBITDA margin expected to remains stable YoY due to increased opex. Expect API business to post 55% YoY growth in sales on low base of past year. Update on 1) ARV pricing in newer tenders, 2) new order wins in CS segment.

9. Piramal Pharma Limited

According to the brokerage, Expect sales to improve marginally QoQ across the business segments. Controlled cost and increased operating leverage to lead to better EBITDA margin. Watch out for outlook on the order book and timeline to execute in the CDMO segment. Watch out for outlook in the CHG segment given volatility in the macro environment due to COVID.

10. Solara Active Pharma Sciences Limited

According to the brokerage, Expect recovery in business to continue on QoQ basis, led by improving execution. Higher sales and controlled cost to keep EBITDA margin on uptrend. Outlook on supply/demand dynamics in key products of the portfolio. Update on improving utilization of the Vizag facility.

11. Sun Pharmaceutical Industries Limited

According to the brokerage, US sales expected to grow by 8% YoY to USD429m; Price erosion in the Taro portfolio to be a drag on US growth. DF sales expected to grow at 10% YoY. Outlook for the specialty portfolio given COVID-led volatility. Update on patient recruitment for additional indication related to Illumya, g-Revlimid/g-Asacol approval.

 

Disclaimer

The stocks have been picked from the brokerage report of Motilal Oswal. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to consult with certified experts before making any investment decision.