Pharma Stocks Outlook for the week – 28.09.2015 to 01.10.2015
Lupin
to continue with positive momentum
Among
stocks of major pharmaceutical companies which are seen trading in a range next
week,
those of Mumbai-based Lupin Ltd will maintain a positive momentum after Thursday's
breakout following reports that Credit Suisse has upgraded the stock to outperform
from neutral and raised the target price by 27%. According to reports, Credit Suisse
has upgraded its outlook on Lupin after the company increased the price of its diabetes
drug Fortamet by 200%.
Given
the huge price hike, the OPM's (operating margin) could see an expansion of 225
bps (basis points) and result in the EPS (earnings per share) expansion of 13%
and 12% in FY2016E and FY2017E respectively. However, even after the upgrade;
if the earnings growth sustains, the valuations are too rich for any upgrades.
Thus, maintaining our neutral stance on the stock.
Stocks
of beleaguered Elder Pharmaceuticals Ltd also rose sharply during Thursday's trading
session after the company announced that its board will meet next week to consider
a proposal for sale of overseas subsidiaries. Even as the share surged over 16%
during Thursday’s trading session, the positivity in the stock was not
sustainable owing to the weak fundamentals of the company. Elder
Pharmaceuticals' stock was seen trading in a narrow range next week and a
further upward breakout is expected only if it managed to breach the resistance
level of 130 rupees. During the next week, stocks of Cipla will underperform
peers in the sector as only sideways trading is expected in the company's stocks.
