The Hindu Business Line : It's now pharma stocks' turn to attract investors

Stocks led by Cipla Ltd, Dr Reddy's Laboratories, Sun Pharmaceuticals, Matrix Laboratories, Ranbaxy Laboratories and Torrent Pharmaceuticals, which have been a laggard over the last 12 months, are now attracting investor interest in anticipation of a robust earnings growth in the next two years.

Analysts said the stock prices of pharmaceutical companies have started moving up on purchases by fund houses, which were underweight on the sector over the last one year.

"The stock prices of pharmaceutical companies were underperforming over a year or so due to pressures in terms of margins and due to the fact that there were no new launches during that period," said Ms Sarabjit Nangra, Research Analyst (Pharmaceutical), Angel Broking.

Going forward, the pressure in terms of margins will be lesser and the growth robust on the back of a number of new launches by the pharma companies, she said.

Positive news flows on acquisitions (Aurobindo Pharma, Matrix Laboratories, Glenmark Pharmaceuticals, Nicholas Piramal), stock split (Torrent Pharmaceuticals), bonus issue (Cipla, Torrent) and restructuring (Sun Pharmaceuticals) have also resulted in attracting buying interest from investors.

"One of the major problem in pharmaceutical sector was the lack of liquidity. The recent announcements on bonus and stock split by some companies may have attracted investors," said Mr Pankaj Namdharani, Head (Equities), SPA Securities.

On the BSE, Cipla gained by 15.62 per cent over the last one week from Rs 490.3 to close at Rs 559.20 on Friday, while Dr Reddy's Laboratories rose by 3.86 per cent over a week to close at Rs 1,204.80. Dr Reddy's flared up as much as 16.65 per cent over a month from Rs 1,032.85.

Shares of Sun Pharmaceuticals shot up by 15.7 per cent over the last one month to Rs 787.80, GlaxoSmithkline Pharmaceuticals increased by 4.51 per cent over a week to Rs 1,391 and Matrix Laboratories was up by 8.63 per cent over a week's time to close at Rs 268.10.

Torrent Pharmaceuticals' counter gained as much as 23.69 per cent over a month to close Friday's trade at Rs 1,051.10 and Orchid Chemicals & Pharmaceuticals gained as much as 13.28 per cent over a week to Rs 280.25.

Aurobindo Pharma gained by 6.77 per cent over a week to Rs 605.65. Strides Arcolab rose by five per cent over the week to end at Rs 360.95.

Mr D.D. Sharma, Head - Research (Retail), said investors also see major benefit to Indian companies on $100-billion worth drugs going off-patent in the US. "There will be pressure on margins due to competition. But the huge volumes will lessen the pressure," he said.

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