August turned out to be a bounty month for Gujarat's pharma companies. Shares of three companies in the sector touched their 52-week high on the Bombay Stock Exchange (BSE) on Monday, while two others touched 52-week highs earlier this month.
Most pharma firms outperformed the benchmark index, Sensex on Monday. While Sensex ended at 17678.81 points, down by 104 points from its previous close, Dishman Pharmaceuticals and Chemicals (DPCL), Alembic Pharma Ltd and Torrent Pharma Ltd hit their 52-week high in the intra-day trades on the BSE on Monday.
DPCL hit a 52-week high of Rs 102.60 during intra-day trade to close at Rs 101.05 with sharp gains of 7.27 per cent over previous close, while Alembic Pharma touched year-high at Rs 74.25 in the opening trades on Monday, but ended at Rs 69.50, down by 5.05 per cent from the previous close. Torrent Pharma's shares touched 52-week high of Rs 722.70 on the BSE and closed at Rs 703.45 with 0.81 per cent gains over previous close.
Analysts said while there are company specific reasons behind this strong performance, on the whole the pharmaceuticals sector has been doing well during the quarter.
Sujay Shetty, director and leader pharma lifesciences of PricewaterhouseCoopers (PWC) says, "The depreciating rupee has worked in their favour as they could record higher sales value. Plus, the domestic market has been strong, growing steadily at 15-17 per cent. Besides several product launches in the US, Japan has emerged as a new market for many domestic pharma players, bringing in new revenues in to the mix."
At a time, when the stock markets are volatile, pharma stocks are considered to be 'defensive' stocks, they remain relatively immune to market volatility, inducing more buying, Shetty added.
"Pharma stocks are safe investments, immune to a great extent to market volatility. This is why the pharma space is doing so well in the recent months." said Sarabjit K Nangra, vice-president, research of Angel Broking.
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For Dishman, a successful turnaround of its ailing Swiss subsidiary Carbogen Amcis, the consolidated profit for the quarter grew two-fold to Rs 38.70 crore in the June quarter. DPCL now eyes consolidated net profit of Rs 100 crore this fiscal.
On top of this, news of the company planning to repay a Rs 100 crore bank debt through selling un-utilised proposed SEZ land near Ahmedabad seems to have boosted the price rally. Dishman plans to exit its SEZ business and sell the land near Ahmedabad for Rs 600 crore.
City-based Torrent Pharmaceuticals has posted a marginal rise in net profit during the June quarter, at Rs 103.04 crore over Rs 102.59 crore in the previous corresponding period.
However, Torrent's US operations have recorded a 78 per cent growth during the quarter under review, while its international revenues grew by 33 per cent.
As Shetty puts it, "US markets have done well over the last several months, boosting exports for most big pharma. Exports comprise anything between 20-60 per cent of their overall revenues for leading pharma players, and as all exports are in dollar denominations, the rupee slide factor has proved beneficial."
The rupee has depreciated by around 22 per cent vis-a-vis the dollar on the last one year, from Rs 44 to a dollar levels in July 2011, to Rs 57 to a dollar levels in June 2012.
Interestingly, Vadodara-based Alembic Pharmaceuticals, one of the oldest drug makers in the country, touched a its year-high at a time, when company's active pharmaceutical ingredients (API) plant at Panelav was gutted in a massive fire accident a day back. The company informed the BSE that the plant was covered by insurance and that Alembic has already informed the insurer.
As for Claris Lifesciences, and Cadila Healthcare, which touched 52-week highs on August 21 and August 7 at Rs 244.5 and Rs 925.9 respectively, both companies have received USFDA approvals for their facilities, which were barred from exporting to the US post warning letters issued by the US drug regulator.
The company shares ended at Rs 197.50 and Rs 881 respectively on Monday.