Pharma stocks rally after Rs 2.23 lakh-crore boost for healthcare sector; Cipla, Sun Pharma hit 52-week high

Source: AFP

Source: AFP

The Indian stock market is continuing its bull run for the third consecutive day with Nifty surging over 7 percent since the Budget day. Sensex is up 492.79 points or 0.99 percent at 50290.51, and the Nifty jumped 156.10 points or 1.07 percent at 14804.

Nifty Pharma jumped over 3 percent and is the outperforming sector. Finance Minister Nirmala Sitharaman in her Budget speech announced an outlay of Rs 223,846 crore for health and well being. This was an increase of 137 percent compared to 2020, when the outlay on healthcare stood at Rs 94,452 crore. The rise was primarily led by Rs 35,000 crore allotment for COVID-19 vaccines.

The finance minister also announced a new scheme called the PM Atmanirbhar Swasth Bharat Yojana for boosting the primary, secondary, and tertiary healthcare, with a budgetary outlay of Rs 64,180 crore spread over six years.

This funding would be used to develop capacities of health care systems, develop institutions for detection and cure of new and emerging diseases.

The top gainers from the pharma space included Cipla which spiked over 6 percent followed by Dr Reddy’s Labs and Sun Pharma which gained 4 percent each.


The other gainers included Biocon, Cadila Healthcare, Divis Labs, Lupin and Torrent Pharma.

Dr Reddy’s Labs was one of the top index gainer. The company posted December quarter consolidated net profit at Rs 20 crore against a loss of Rs 569.7 crore in the year-ago period.

The company said the Q3FY21 PAT was impacted primarily due to the non-recognition of deferred tax assets on impairment. Revenue for the said quarter came at Rs 4,930 crore which was up 12 percent YoY and 1 percent QoQ.

On the other hand, Sun Pharma reported a net profit of Rs 1,852.5 crore in Q3 FY21 against Rs 913.5 crore in the corresponding quarter a year ago. The profit figures were above market expectations as a CNBC-TV18 poll had estimated the profit at Rs 1,334 crore.

The revenue grew 8.4 percent YoY to Rs 8,837 crore against Rs 8,155 crore in Q3 FY20.

The stocks that hit a new 52-week high on NSE included Cipla, Sun Pharma and Ajanta Pharma.

Kotak Institutional Equities expects the domestic formulations segment to report 3 percent to 6 percent year-on-year (YoY) growth on an underlying portfolio basis except for Cipla and Dr Reddy’s.

Kotak expects 17 percent YoY growth for Cipla’s domestic business despite moderation of Covid portfolio while Dr Reddy’s full quarter consolidation of Wockhardt portfolio will drive higher growth on a reported basis.

Besides, Kotak expects US revenues to increase QoQ across companies with Lupin and Cipla benefitting from market share gains in albuterol, Dr Reddy’s from a product launch and Sun witnessing a ramp-up in US specialty sales.

“The rally in the pharma space has been driven by a pick-up in the domestic and the export market along with some positive anti-China sentiments also. Some of the API manufacturing companies have surged more than 300-400 percent in a year,” said Yash Gupta Equity Research Associate, Angel Broking.

“We expect API story to consolidate in FY2021 as growth in revenue and net profit will be in the range of 10-20 percent as compared to growth of 30-60 percent in FY20,” he added.

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