BackAre healthcare stocks attractive now? Brokerages recommend these shares to buy or sell
For Dr Lal Pathlabs, Kotak Institutional Equities maintained a bearish stance, reiterating the downside risk to their flat long-term pricing assumptions
PremiumWhile the improvement in outlook is encouraging, the valuations of Divi's Laboratories remain high, considering the flat earnings growth in FY24, said domestic brokerage house Motilal Oswal Financial Services, maintaining a neutral call on the stock with a target price of ₹2,620, suggesting a 6 per cent downside risk.
The current market price of Divi's Laboratories is ₹2,798. The stock has gained 169.81 per cent in the last five years. Shares of Divis Labs hit a 52-week high of ₹4,640.80 on 28 April, 2022 and 52-week low of ₹2,730 on 14 March, 2023.
Divis Labs has witnessed reduction in raw material cost in the recent past. Also, it has largely consumed the higher-cost raw material. Further, there has been relaxation in power/fuel and freight cost as well.
On an overall basis, easing cost pressures is expected to revive the profitability for Divi going forward, the note said.
The brokerage factors a 260 basis point margin expansion over FY23-FY25, led by reducing cost drag, scaleup of custom synthesis business in contrast media/peptide category as well as sartans/other new molecules in API business.
"We expect 15 per cent earnings CAGR over FY23-25, with 30 per cent YoY growth in FY25. We expect earnings to be flat YoY in FY24, partly due to Molnupiravir-related benefits accrued in 1HFY23 and partly due to gradual improvement in profitability/outlook in the API generics segment," it said.
Dr Lal Pathlabs maintains ‘bearish stance’
For Dr Lal Pathlabs, Kotak Institutional Equities maintained a bearish stance, reiterating the downside risk to their flat long-term pricing assumptions.
"At 50 times FY2024 EPS, valuations stay rich, adequately pricing in the long-term volume growth narrative," the brokerage said, retaining its 'sell' rating on the stock.
The brokerage said it stays guarded on any meaningful earnings boost to listed incumbents such as DLPL, even if competitive intensity from smaller online players ebbs.
“In our view, the real threat remains from the top-tier health-tech platforms and large offline entrants. Apart from pricing, there can be additional pressure on DLPL’s margins due to heightened marketing expenses, and tech investments and its foray into tier 2/3 cities. Our DCF-based FV of ₹1,610 implies a 10-year sales growth of 13 per cent," the note said.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
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