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Global brokerage and research firm BNP Paribas projects its Indian pharma and healthcare coverage universe to report aggregate c6% year-on-year (YoY) revenue growth and c3% y-y earnings decline in 1QFY23. 

It expects revenue growth during the quarter to be company specific, with the domestic formulation segment growing aggregate c1% y-y due to the high base of Covid related sales in the India business for some companies and US sales improving only c2% quarter-on-quarter or QoQ (+6% y-y) even as new launches partially offset the price erosion.

Sharing its top stock picks, BNP Paribas said it continues to prefer Sun Pharma and Aurobindo Pharma in the pharma space and Dr Lal Path Labs and Fortis Healthcare in healthcare.

It has Buy ratings on pharma stocks Sun Pharma, Aurobindo Pharma, Apollo Hospitals, Divi's Laboratories, Metropolis Healthcare, Torrent Pharma whereas BNP Paribas has Hold stance on Cipla and Zydus Lifesciences.

“In Sun Pharma, we see a structural story, with ramp-up in specialty sales and a strong India business. Aurobindo Pharma offers us valuation comfort with its strong product portfolio and a possible trigger from the restructuring of its injectable business," the note stated.

The brokerage said it like Dr Lal Path Labs due to its consistency in volume growth, market leadership and long-term value accretion from the acquisition of Suburban Diagnostics. Meanwhile, Fortis Healthcare is a turnaround story with a focus on growth and trades at a reasonable valuation, in its view.

“In the healthcare space, hospitals should recover from the 4QFY22 low, with occupancy improvement as the Omicron wave is over now. Diagnostic companies’ revenue should decline y-y due to the high base of Covid-related revenue, which is tapering off with lower volume and reduced pricing. Non-core (ex-Covid) revenue should likely see a decent recovery, led by better volumes," BNP Paribas' note on Indian pharma and healthcare sector added.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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