The Indian stock market was under pressure on April 22 as the country reported more than 3.14 lakh cases in the last 24 hours, the highest single-day spike ever in the world and a record 2,104 deaths. The Sensex was down 204.23 points, or 0.43 percent, at 47501.57, and the Nifty shed 41.10 points, or 0.29 percent, at 14,255.30.
Individual sectors, including the S&P BSE healthcare index,were trading in the green, adding over a percent with Suven Life Sciences and Morepen Labs surging over 14 percent followed by Necter Life Sciences, Astrazeneca Pharma, Panacea Biotech and Vivimed Labs, which clocked gains of more than 9 percent in early trade.
The other gainers included Glenmark Pharma, Lincoln Pharma, Marksans Pharma, RPG Life Sciences, Shilpa Medicare and Unichem Labs among others.
“The Indian diagnostics industry offers consistent, the long-term growth potential of 11-12 percent and national diagnostic chains would continue to outperform industry growth,” brokerage firm IIFL Securities said in a note.
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The brokerage firm believes increasing health awareness post-COVID-19, specialised and home collection segment will continue to aid realisations.
Larger players from the sector are positioned to gain more than the smaller ones and fragmented market share is an opportunity for larger players to gain market share.
As per IIFL, the listed Indian diagnostic companies (Dr Lal, Metropolis and Thyrocare) trade at median valuations of about 49 times FY23 PER (price-earnings ratio).
The brokerage firm expects valuations for these national diagnostic chains to sustain on the back of their long-term volume-led growth potential, continued gains in market share from unorganised standalone labs, limited capex and working capital investments, strong FCF generation and high RoIC post-tax.
The financial and operating metrics for the national diagnostic chains are comparable to that of FMCG and consumer discretionary stocks and the B2C segment also provides long-term durability to diagnostics business through consumer brand building akin to FMCG. Consequently, the diagnostic companies trade at similar valuations to many of the FMCG and consumer discretionary stocks, IIFL said.
The share price of JB Chemical and Pharmaceuticals was up over 4 percent. hitting a new 52-week high on BSE followed by Morepen Labs, Panacea Biotec, Vivimed Labs, Neuland Labs, Laurus Labs, Cadila Healthcare and Apollo Hospitals.
Shitij Gandhi, Senior Technical Analyst at SMC Global Securities, suggests buying Glenmark Pharmaceuticals with target price at Rs 652. “On the technical front, follow-through buying has been observed in the stock after a breakout above the falling trendline of a sloping channel on short-term charts,” Gandhi said.
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