These pharma stocks are Centrum Broking's top picks in the sector

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Domestic brokerage Centrum Broking has maintained its positive stance on the pharmaceuticals sector and it remains optimistic about further earnings revisions even in the earnings season. The brokerage expects strong start to FY22 for the sector.

In a note, Centrum said it expects revenue growth of 15% YoY for its coverage in Q1FY22, with average EBITDA margins at 24%. ”YoY performance should benefit from low base due to lockdowns, a devastating second pandemic wave driving higher medicine consumption domestically, and better than expected recovery in EMs and the developed world,” it said.

Dr Reddy’s, Sun Pharma, Aurobindo are some of the top stock picks by the brokerage in the pharma sector. ”We hold on to our top large-cap picks as ARBP (Aurobindo Pharma), DRRD (Dr Reddy’s) and SUNP (Sun Pharma). Among MNCs, we maintain our bias towards BOOT and PFIZ. In APIs (Active Pharmaceutical Ingredient) we continue to like ARTD (Aarti Drugs), and in domestic-focused midcaps, we like FDC ltd,” Centrum Broking said.

For API companies, the brokerage expects to see revenue growth, though profit growth could be flattish, given high base and some raw material price inflation. It believes that margins would be benefited amid lower domestic spends and higher growth.

It further said that the pandemic has taken a breather, driving gradual market recovery and the generic players have seen stable growth sequentially. Centrum said that it seen lower pick-up in Albuterol sales for Cipla, whereas other products have been picking up well for the pharma company.

”Sun Pharma’s specialty sales basket continues to report better ramp-up amid pandemic while ARBP’s injectable sales are recovering. ARBP’s results would not be directly comparable on account of Natrol divestment. DRRD has seen higher uptake in Q1 compared to Q4FY21,” the note stated.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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