Lower valuations drive mid-cap pharma scrips

Several mid-cap pharmaceutical stocks have outperformed their larger peers and the Sensex over the past fortnight.

Analysts highlight that while larger players Ranbaxy and Dr Reddys are expected to gain from the upcoming patent expiry of Zocor in the US, investors are still buying mid-cap stocks as valuations are still attractive vis-a-vis the larger players.

For instance, Ranbaxy has a trailing P/E of 73.5 times, while for Dr Reddys it is 79.8 times. In contrast, Cadila Healthcare has a trailing P/Ea of 43 times earnings, while for Vimta Labs it is 36 times.

Sarabjit Kour Nangra, analyst, Angel Broking, says, "Select mid-cap pharma companies are showing high growth opportunities in the medium term and it has ensured investor attention."

Adds Surya Narayan Patra, analyst, Networth Stock Broking, " Valuations are tilted in favour of mid-cap stocks."

As a result, stocks such as Torrent Pharma has gained about 18 per cent over the past foartnight compared with 2.55 per cent gain in the Sensex. The BSE's healthcare index has gained 3.2 per cent during this period.

Meanwhile, other mid-cap stocks such as Vimta Labs have gained about 26.4 per cent during this period, while Cadila Healthcare has gained 11.8 per cent. In contrast, Cipla has gained barely 1.5 per cent over the past fortnight, while Ranbaxy has gained about 7.5 per cent.