Money making stocks: Shares that traders can stock for big gains

Depreciated rupee, normalized generic price erosion, seasonally strong quarter in the US and focus on cost optimization will enable Indian pharma companies to post better numbers in 3QFY19. We expect our coverage companies to deliver 8 per cent YoY top line growth, 21 per cent EBITDA margin (flat YoY) and 12 per cent YoY earnings growth. This will be the second consecutive quarter with positive sequential growth in the US business, aided by softening of pricing pressure, exit of many US based companies from commodity products and the presence of a flu season. India branded revenues are also likely to grow 10 per cent YoY and 4 per cent QoQ. The sequential growth is solely driven by a jump in SUNP’s revenues post inventory adjustment in 2QFY19. As articulated in our Jun-18 sector note, the pharma sector is recovering from US market woes and has started growing sequentially. With a few companies still in investment phase for their specialty businesses, earnings growth is still slower than anticipated. The cost rationalization efforts taken by SUNP, DRRD, CIPLA and LPC can help counter this incremental spend.

Hence, some stocks in Pharma sector is expected to deliver better returns. Amey Chalke, Analyst at HDFC Securities said in a written statement, "Stocks like Dr Reddy’s, Jubilant and Dishman are those some of the Indian pharma sector shares, which traders looking for a buy position can think to stock for better gains in short-term perspective."

Talking on Dr Reddy's share Chalke of HDFC Securities says, "Revenue is expected to remain flat (YoY and QoQ) as recovery in the US business is still awaited. EBITDA margin is also likely to remain unchanged, at around 19.5 per cent, as biosimilar launches in emerging markets and cost control measures will offset the fall in US sales."

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On Jubiliant share Amey Chalke says, "Outlook of Jubiliant for third quarter of the FY 2018-19 looks good. Revenue is expected to see a 6 per cent YoY growth on the high base for the same period. Generic Pharma business to report strong growth on account of Valsartan supplies and Chemical business is also likely to see a recovery post the disappointing first half of 2019. EBITDA margin would come to around 21 per cent and largely remaining flat."

Asking the market investors to pump their money into the Dishman shares, Amey Chalke at HDFC Securities said, "Outlook for the company in thrid quarter doesn't sound well but the traders can take buy position in this stock as update on commercial product launches over the next 2 years can fuel the rally of the stock. Outlook for Vitamin D softgel business would also be a key to monitor."

Apart from these three picks in the pharma sector Amey Chalke recommended the market invetors to buy those pharma stocks which is expected to deliver more than 10 per cent returns over the next 12 month period.