Over the past few days, we have seen Covid-19 cases reach a record high. This has put pressure on the government and infrastructure of few states like Maharashtra and Delhi, and to combat the situation, the states have issued new guidelines. With the increasing fear of lockdown 2.0, NIFTY50 came back to the levels of 14,200 pts after touching 15,000 pts. Many companies listed on BSE and NSE pivoted from bullish to bearish in no time. But there is one sector that ought to benefit from the increase in the number of cases, the pharma sector. With vaccination drives happening all over the country, the pharma sector ought to benefit. Here are the top 7 stocks which have the potential to grow in times to come:Top 7 Pharma Stocks in India
- Cipla International (CIPLA): It is an Indian multinational drug company that Khwaja Abdul Hamied founded in 1935 in Mumbai. The word CIPLA stands for 'Chemical, Industrial &Pharmaceutical Laboratories. The company manufactures medicines to treat respiratory, cardiovascular disease, arthritis, diabetes, weight control, depression, and m5any other medical conditions. It was among the first companies to launch 'Remdesivir,' the primary drug approved by the FDA for treating people suffering from Covid-19. With the rise in the number of Covid-19 cases, there is a huge demand for this drug in India, and to satisfy those demands, the company has doubled the production of the drug. As of 19th April 2020, the stock's consolidated P/E is at 34.10 at a discounted price than that of the industry. Although the company's dividend yield is only 0.42%, its ROCE and ROE stand at 12.32% and 9.81%, respectively. It is a low debt company and has Zero Promoter Pledge, and from March 2020, the corporate has managed to give almost 58% returns.
- Sun Pharma (SUN PHARMA): It is the No. 1 Indian Multinational Pharmaceutical company and No.4 worldwide that sells pharmaceutical formulae and active ingredients in India and United States. MrDilipSanghavi established the company in 1983, and the company was listed on the stock exchange only in 1994. With a market cap of 153 crores, the company is currently valued at a consolidated P/E of 59.80. Although it is priced a bit higher than the industry's P/E, which is 41.43, one cannot ignore the fact this is a company that has strong financials. The company's ROE has increased from 6.43% to 8.31% YoY, whereas the ROCE is 10.60%. Even though the dividend yield is 0.63%, there has been significant growth in net profit YoY, and in the one year, Sun Pharma has given 39.98% returns.
- Biocon Limited (BIOCON): It is Bangalore based biopharmaceutical company that produces active pharmaceutical ingredients. The products manufactured by Biocon are sold in over 120 countries around the globe. Initially, the company was established with only $10,000 (approximately Rs. 7,50,000) in 1978, and in 2021, the company's market capitalization has reached Rs. 48,762 crore. In early July 2020, the company launched the drug Itolizumab, the first biologic therapy, to treat covid patients with moderate to severe complications. Presently, the stock is valued at a consolidated P/E of 79.83, almost double that of the industry. The company has a strong cash-generating ability. The Return on Equity (ROE) is 11.15%, and the return on capital employed (ROCE) is 11.61%. And although the company's dividend yield is only 0.42% in 5 years, the company has given over 335.80% returns.
- Glenmark Pharmaceuticals (GLENMARK): The company was founded in Mumbai by Gracias Saldanha in 1977. It manufactures generic drugs and active pharmaceutical ingredients. The company launched its IPO in 1999, and by 2008, it became the 5the largest pharmaceutical company in India. In June 2020, the company began distributing Favipiravir, a drug used to treat Covid-19 patients under the brand name FabiFlu. In September 2020, the company's revenue increased from 2,400 crores to 2920 crores, but the same is not reflected in the ROE and ROCE, which have been declining YoY. Nevertheless, the stock was able to give 84.10% in just one year. Currently, the share seems to be undervalued as its P/E ratio is only 17.08, and with the rising Covid-19 cases in the country, the stock is ought to perform better in the coming times.
- DrReddys Lab (DR REDDY): It is a 37-years-old Hyderabad-based multinational pharmaceutical company. The company was founded by Mr. Anil Reddy and presently has over 190 medications, Biotechnology products, and 60 APIs (active pharmaceutical ingredients). In 2001, DrReddys offered its IPO of $132.8 million on New York Stock Exchange. With a market cap of Rs.82,620 crores, it is a company with strong financials and a dividend yield of 0.50%. The stock is fairly valued and has a P/E of 37.98, approximately 3 points lower than that of the industry. The ROE of the stock is 12.98%, and ROCE is 12.04%, and since March 2020, the share has given almost 27% returns. The company manages to generate profits from already existing assets efficiently. Dr. Reddy's Lab also intends to supply up to 250 million Sputnik V vaccines to India imported from Russia in May.
- Gland Pharma (GLAND): Gland Pharma Limited was incorporated in the year 1978 in Hyderabad. It is the first pharma company owned by a Chinese that recently got listed on BSE and NSE on 19the November 2020. The company manufactures an extensive range of high-quality injectables and supplies its products in over 60 countries. The company has given 20.53% returns in just three months. The company has solid financials and has a steady growth of ROE and ROCE. The ROE of the company has increased from 15.78% in FY19 to 21.19% in FY20 as the company uses the shareholders' funds effectively. The company's capital is used to generate profits, and the ROCE has grown from 23.74 in FY19 to 26.83% in FY20. Although the company's growing costs for long-term projects stand as a barrier to its growth, the stock has proved its potential with a strong performance over the past few months.
- Syngene International (SYNGENE): Syngene International is one of the leading contract research organizations founded in India. It is a subsidiary of Biocon Limited and was founded in the year 1993. It is a mid-cap company with a market capitalization of Rs. 23,832 crores. There is steady growth in ROE and ROCE, which as of March 2020, are 18.94% and 18.30%, respectively. It is a low debt company with increasing profits and revenue QoQ and Zero Promoter Pledge. Its consolidated P/E stands at 65.40. In 1 year, the stock has given almost 109% returns. In September 2020, the company had received ICMR's approval for the Covid-19 antibody test. Keeping the second wave in mind, the pressure over Syngene International has also increased as there is an urgent need for specific testing tools.
One cannot predict when the pandemic will end. The Covid-19 cases are increasing day by day, and India remains the most affected country. The fear of another stock market crash remains persistent among the investors and traders, but the pharma stocks are a silver lining in these dark times.