 "Pharma shares in focus;Astrazeneca, Glenmark, Divi's, Torrent rally upto 9%")
Pharma stocks in focus: Shares of pharmaceutical companies were in demand on Monday with Astrazeneca Pharma India, Glenmark Pharmaceuticals, Divi's Laboratories, and Torrent Pharmaceuticals rising over 5 per cent on the BSE in the intraday trade, in an otherwise subdued market, after the sector reported healthy March quarter (Q4FY24) earnings.
In comparison, the S&P BSE Sensex was up 0.09 per cent at 75,480 at 10:00 AM.
Among individual stocks, Torrent Pharma stock price hit a new high of Rs 2,839.90, surging 9 per cent in the intraday trade after the company reported a strong 56 per cent year-on-year (Y-o-Y) jump in profit after tax (PAT) at Rs 449 crore. Earnings before interest, tax, depreciation, and amortisation (Ebitda) margins expanded by 298 bps to 32.2 per cent. Revenues grew 10 per cent Y-o-Y to Rs 2,745 crore, mainly driven by growth in India, Brazil, and other emerging markets.
Branded business performances of India and Brazil (together account for ~73 per cent of the sales) continue to have strong correlation with the company's margins (GPM and EBITDAM). India continues to perform well with focus on power brands besides consumer business foray. Brazil numbers were driven by planned focus on branded generics and field force expansion.
"In Germany, the volatility has reduced due to normalcy in tender allocation. US continues to weigh negative due to lack of new launches, but the situation is set to improve in FY25 as Dahej received EIR from the USFDA last year. The management expects margin improvement momentum (50-100 bps every year) to persist as besides branded generic markets in India and Brazil, the future looks far better for generic markets of Germany and now US as well," ICICI Securities said in a note.
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"With field force expansion, new launches, and market share gains in existing products, Torrent Pharma continues to exhibit superior growth in branded generics segment across domestic formulation (DF) and LATAM. With regulatory issues behind, TRP is expected to improve growth prospects in the US generics segment on the back of new approvals and subsequent launches," Motilal Oswal Financial Services (MOFSL) said in the result update.
Glenmark Pharma, meanwhile, too, hit a 52-week high of Rs 1,123, surging 8 per cent on the back of a five-fold jump in average trading volume. The company reported a healthy 27 per cent Y-o-Y growth in Ebitda at Rs 504 crore and margins stood at 16.5 per cent in Q4FY24. Revenues, however, grew just 2 per cent to Rs 3,063 crore as decent India and ROW growth was neutralised by weak US sales.
"This past year has been a period of significant transition and transformation for Glenmark. The company successfully divested a majority stake in Glenmark Life Sciences, concluding the year in a strong net cash positive position. The company’s branded markets continued to deliver robust growth, particularly in Europe and other key international markets. While we encountered some headwinds in our US business, we remain optimistic about ability to regain our growth trajectory in the coming year," the management said.
The company continues to reshuffle business segments and geographies to optimise margins and maintain a secular growth trajectory. It has addressed the legacy debt issues by hiving off the GLS stake recently and is now looking to restructure existing businesses, ICICI Securities said in a note.
Shares of Divi's Lab also hit 52-week high of Rs 4,356.85 as they rallied 6 per cent in the intraday trade after it reported 50 per cent Y-o-Y growth in Ebitda at Rs 731 crore and margins improvement of 675 bps to 31.7 per cent in Q4FY24.
The company’s profit after tax (PAT) increased 69 per cent YoY to Rs 538 crore. Revenues were up 18 per cent YoY at Rs 2,303 crore mainly driven by 47 per cent growth in Custom Synthesis (CS) to Rs 1,175 crore and 25 per cent growth in Nutraceuticals to Rs 188 crore.
Divi's delivered a strong beat on earnings in Q4FY24, fueled by a revival in the CS business. Improved sales growth drove better profitability for the quarter as well. Having said these, FY24 would be the second consecutive year for YoY earnings decline, albeit at lower intensity, with improved traction in the CS business for the quarter, MOFSL said.
"The company has been making great strides in both the CS and API segments through a strong chemistry skill set. It is not only getting ready to supply APIs once they are off-patent, but also working on backward integration to gain market share/maintain profitability in the existing API portfolio. Divi’s continues to improve services under the CDMO segment during product development and manufacturing stages," the brokerage firm said in a result update. It however, reiterates a 'Neutral' rating on the stock with a target price of Rs 3,900.
Among other pharma stocks, Astrazeneca soared 9 per cent to Rs 6,580, and JB Chemicals & Pharmaceuticals rallied 5 per cent to Rs 1,749 on the BSE in the intraday trade.
Going ahead, India Ratings and Research (Ind-Ra) expects US-focused pharma companies to sustain their revenue improvement trend in FY25 on account of heightened drug shortages in the US market. This will not only provide potential for volume growth, but also limit price erosion to single digits over the next 12-18 months, leading to improved returns.
"Also, given the limited original abbreviated new drug application (ANDA) filings and delays in approvals provided by the USFDA, the drug shortage in the US provides an opportunity for Indian players with necessary approvals to gain market share in a competitive-but-attractive market," Ind-Ra said.
