Nifty Pharma index hits all-time high; Sun Pharma scales 4-year high

Since April, the index has outperformed the market by surging 15 per cent, against 1.7 per cent gain in the Nifty50; Sun Pharma scales 4-year high

The Nifty Pharma index hit an all-time high of 14,228, after rising 3.5 per cent in intra-day trades on the National Stock Exchange (NSE) on Monday, led by a strong rally in stocks like Torrent Pharma, Alkem Laboratories, Cadila Healthcare, Aurobindo Pharma, Dr Reddy’s Laboratories, Sun Pharmaceutical Industries and Divi’s Labs. The pharma index surpassed its previous high of 14,020.70, touched in intra-day trade on April 7, 2015.

Since April, the Nifty Pharma index has outperformed the market by surging 15 per cent, against 1.7 per cent gain in the Nifty50 index. In the past one month, the market values of Cadila Healthcare, Lupin, Dr Reddy’s Laboratories, Divi’s Laboratories, Aurobindo Pharma and Sun Pharma have appreciated between 10 per cent and 21 per cent. In comparison, the benchmark index was up less than 1 per cent in that period.

The gains are led by a strong performance by pharmaceutical companies in the domestic market in April, tie-ups by Indian generic players to market covid-related drugs and expectations of a double digit growth in the March quarter.

Indian Pharma Market (IPM) sales for April 2021 showed an unprecedented 51.5 per cent growth year on year (YoY). Adjusting for the low base effect and excess Covid sales, April YoY growth is at 17.7 per cent, still very strong, analysts at Jefferies said in pharma sector report.

There is likely a component of stocking up as many states entered lockdowns during April. May is expected to show similar trends. However, we remain concerned about FY22 growth as Covid delays normalisation. The brokerage firm further said, since May also has a low base effect and Covid related sales continue to be strong, the month is likely to show strong growth. However, they expect growth to normalise thereafter. “We are also concerned that a surging Covid will discourage patients from delaying doctor visits which may impact overall FY22 growth,” the report said.

In April’21, Glenmark Pharmaceuticals (181 per cent YoY), Cipla (73.5 per cent), and Alkem Laboratories (63.7 per cent) delivered robust growth. Torrent Pharma, Sun Pharma, Lupin, and Alembic Pharmaceuticals also showed better traction, albeit lower than the industry in April 2021, Motial Oswal Securities said in healthcare sector update.

Among individual stocks, Sun Pharma hit a four-year high of Rs 702.50, up 3.3 per cent on the NSE in intra-day trade today. The stock was trading at its highest level since April 2017. Shares of Cadila, Aurobindo, Divi’s and Lupin also hit their 52-week highs on Monday.

The street also reacted positively to the announcements by Cipla, Lupin and Sun Pharma after they announced a tie up with US drug major Eli Lilly. The three companies will make and distribute anti-inflammatory drug Baricitinib which has been approved for treatment of Covid.

The street will also keep an eye out for the March quarter results with Cipla and Dr Reddy’s expected to announce their numbers on Friday, May 14. Market leader Sun Pharma will announce their numbers later in the month.

ICICI Securities expects Sun Pharma’s earnings before interest, taxes, depreciation, and amortisation (EBITDA) margins to improve 635 basis points (bps) YoY to 23 per cent mainly due to lower marketing, travel expenses and a better product mix.

Revenues are likely to grow 7 per cent YoY to Rs 8,760 crore led by 10 per cent growth in domestic and 12 per cent growth in both Rest of World (RoW) and Emerging Markets. US is expected to grow around 2.2 per cent YoY to Rs 2,773 crore amid continued traction in the specialty portfolio. Adjusted net profit is expected to grow 120.2 per cent to Rs 1,455 crore, the brokerage firm said in a results preview.