Analysts anticipate muted results for the June quarter, so buy pharmaceutical stocks. Find Out More.

Pharma stocks to buy: Due to a high covid-led base, the Indian pharmaceutical sector had a value-terms fall of 8.7% YoY between April and May of this year. During the same period, volumes decreased by 14.8% YoY. The brokerage firm ICICI Direct anticipates that the pharmaceutical and healthcare industries would report muted growth during the quarter ended June'22 due to a high base in the domestic market, ahead of the release of results for the quarter ended in June. Additionally, increased prices for raw materials and freight as well as pricing pressure in the US market brought on by excessive channel inventory continue to hinder overall profitability.

Therefore, we anticipate that the EBITDA margin of the covered companies would decrease by 300 basis points (bps) year over year to 19.2%. Hospitals, diagnostics, and devices in the healthcare sector would also report weaker YoY performance, mostly because of a high base that was supported by covid-led income. Overall, we anticipate our coverage universe to report a meager 1% YoY increase in revenue and a 13.3%-15.33% decrease in EBITDA/PAT, respectively.

Growth During The Quarter to be Company Specific

BNP Paribas, a global brokerage and research organization, forecasts that its Indian pharmaceutical and healthcare coverage universe will have an overall year-over-year (YoY) revenue increase of 6% and a year-over-year (YoY) profitability decline of 3% in the first quarter of FY23. It anticipates that company-specific revenue growth will occur during the quarter, with US sales improving only c2% quarter-over-quarter or QoQ (+6% year-over-year), despite new launches partially offsetting price erosion, due to the high base of Covid-related sales in the India business for some companies.

Key Factors to Watch Out

According to ICICI Direct, when it comes to management commentary, the most important things to keep an eye out for are: Raw material pricing and logistical issues; (ii) updates on USFDA inspection; (iii) channel inventory in the US and traction in complex/specialty products; (iv) growth outlook in India; (v) growth in emerging markets with demand outlook; and (v) growth and competition in devices, diagnostics, and hospitals.

The note listed the three main risks as "unfavorable results of USFDA inspections, currency volatility, and inclusion of new products under NLEM in India."

Top Pharma Stocks to Buy

Abbott India, Alkem, Apollo Hospital, Aster DM, Aurobindo, Dr. Lal Pathlabs, Dr. Reddy's, Fortis Healthcare, Glenmark, Healthcare Global, JB Chemicals, Metropolis, and Natco all received "BUY" ratings from ICICI Direct.

BNP Paribas revealed its top stock picks, stating that it continues to favor Dr. Lal Path Labs and Fortis Healthcare in the healthcare sector and Sun Pharma and Aurobindo Pharma in the pharma sector.

While BNP Paribas has a Hold attitude on Cipla and Zydus Lifesciences, it has to Buy recommendations on the pharmaceutical firm's Sun Pharma, Aurobindo Pharma, Apollo Hospitals, Divi's Laboratories, Metropolis Healthcare, and Torrent Pharma.

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