Nifty pharma index up 55% this year. Here are Yes Securities picks for 20211 min read . Updated: 15 Dec 2020, 01:57 PM IST
- Pharma sector made a solid comeback this year after being lackluster for much of 2019
With over 50% year-to-date gains, the Nifty pharma index has been one of the top outperforming sectors in Indian markets this year. For 2021, Yes Securities' top picks in the pharma space include Torrent Pharma and Aurobindo Pharma and Alembic Pharma.
"Pharma sector made a solid comeback from the lows of March 2020 after being lackluster for much of 2019. While other sectors especially retail facing ones, whose performance depended on footfalls underwent tremendous stress in the period immediately following lockdown, healthcare demonstrated solid remarkable resilience. Indeed, the essential nature of the industry came to the fore, as frantic pre-buying of chronic drugs (diabetes, cardiac, blood pressure medications) drove growth in March," said Bhavesh Gandhi, Lead Analyst – Institutional Equities, Yes Securities.
"Subsequently repurposed COVID drugs like Favipiravir, Remdesivir and HCQS led to robust revenues in domestic and especially export markets. In 2020, domestic therapeutic growth came from cardiac, diabetes and vitamins as immunity boosting products got a fillip from pandemic-induced buying. "
Most of the pharma stocks including large caps like Dr Reddys’, Aurobindo, Cipla, Lupin and Sun rebounded sharply from March 20 lows though the real outperformance came from API companies like Laurus Labs and Divis Labs which have benefitted from pricing tailwinds in API, he said.
"Hospitals and diagnostics, while initially bore the brunt being retail driven businesses, rebounded subsequently as non-COVID business reached 95% of pre-COVID level, leading to catch up rally in Dr Lal, Metropolis and Apollo Hospitals," he added.
"We expect COVID-led drug tailwinds and pre-stocking to have ended in H1 CY20. 2021 could bring the focus on vaccine manufacturing and distribution capabilities, especially if a large 30-40% of population is to be inoculated. We reckon companies like Dr Reddys’, Aurobindo, Cadila and Wockhardt would be key beneficiaries apart from Serum in the unlisted space. Albeit, we note that any vaccine related opportunity would be one-time in nature and accordingly we do not ascribe any significant weightage to vaccine opportunity when picking stocks for 2021," he said.
For 2021, Yes Securities top picks in the pharma space include Torrent Pharma and Aurobindo and Alembic Pharma.
"Our top picks would be companies with large and fast-growing brands in domestic market like Torrent Pharma while Aurobindo and Alembic Pharma fit the bill to play the US generics growth especially in injectables and sartans opportunity respectively," he added.