Centrum Broking's Sumit Gupta Bets On Sun Pharma, Dr Reddy's—Here's Why
Majority of the growth in the pharmaceutical segment in Q2 was led by US market-focussed firms, while domestic pharma was subdued, he says.
Indian pharma companies are likely to gain in the long run from the emerging opportunities over the US Biosecure Act, according to Sumit Gupta, research analyst at Centrum Broking.
After a decent performance in the second quarter of the current financial year, the US market-focussed companies are "much-better positioned" and expected to see better growth as compared to the pharma players dependent on the domestic market, the associate vice president of research at Centrum told NDTV Profit.
Among the big players in the pharma sector, Sun Pharmaceutical Industries Ltd. remains the top pick in the large-cap space, as well as Dr Reddy's Laboratories Ltd., considering the pipeline it has, Gupta said.
Majority of the growth in the segment in the second quarter was led by US market-focussed companies, while domestic pharma was subdued, according to Gupta.
The Indian pharmaceutical market grew just 5% in October as compared to 8–9% a few months back.Sumit Gupta
Gupta pointed out that while the tariffs that could be imposed by President-elect Donald Trump once the Republican government comes to power in January might affect imports from China into the US, the Indian pharma players might also see some impact.
However, the opportunity in the US market for Indian pharma companies is so huge that it is likely to offset the impact, Gupta observed.
"Indian pharma companies are likely to benefit from it, considering the push from China to other countries. If there is some increase in costs, they can pass that on to the customers," he said.
In the hospital sector, the analyst's top pick is Artemis Medicare Services Ltd., which is a small-cap company. "They are expanding into Raipur, which is emerging as a healthcare hub in central India."
The company is expanding from its current 800 beds to nearly 2,000 beds over the next three to five years, Gupta explained. "It has more legs to grow and overall, its profitability is also expected to grow."
In the digital space, companies like Dr Lal Path Labs Ltd., Metropolis Healthcare Ltd. and Thyrocare Technologies Ltd. have increased their margin. "My preferred picks are Dr Lal and Metropolis," he added.
New players have entered the diagnostics space due to less barriers to entry, but maintaining profitability is a challenge. Therefore, companies that have been in the business for many years are expected to do well, according to Gupta.
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